0000930413-01-501381.txt : 20011031
0000930413-01-501381.hdr.sgml : 20011031
ACCESSION NUMBER: 0000930413-01-501381
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011029
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: XL CAPITAL LTD
CENTRAL INDEX KEY: 0000875159
STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351]
IRS NUMBER: 980058718
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10804
FILM NUMBER: 1768984
BUSINESS ADDRESS:
STREET 1: XL HOUSE
STREET 2: ONE BERMUDIANA ROAD
CITY: HAMILTON HM11 BERMUD
STATE: D2
BUSINESS PHONE: 4412928515
MAIL ADDRESS:
STREET 1: CAHILL GORDON & REINDEL(IMMANUEL KOHN)
STREET 2: 80 PINE STREET
CITY: NEW YORKI
STATE: NY
ZIP: 10005
FORMER COMPANY:
FORMER CONFORMED NAME: EXEL LTD
DATE OF NAME CHANGE: 19950720
10-Q
1
c22070_10-q.txt
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
COMMISSION FILE NUMBER 1-10804
XL CAPITAL LTD
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS 98-0191089
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
XL HOUSE, ONE BERMUDIANA ROAD, HAMILTON, BERMUDA HM11
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(441)292-8515
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No[_]
As of October 25, 2001, there were outstanding 124,666,116 Class A Ordinary
Shares, $0.01 par value per share, of the registrant.
XL CAPITAL LTD
INDEX TO FORM 10-Q
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as at September 30, 2001
and December 31, 2000 (Unaudited) ...................... 3
Consolidated Statements of Income and Comprehensive
Income for the Three Months Ended September 30, 2001
and 2000 (Unaudited) and the Nine Months Ended
September 30, 2001 and 2000 (Unaudited) ................ 4
Consolidated Statements of Shareholders' Equity for
the Nine Months Ended September 30, 2001 and 2000
(Unaudited) ............................................ 5
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000 (Unaudited) ... 6
Notes to Unaudited Consolidated Financial Statements ... 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ..................... 18
Item 3. Quantitative and Qualitative Disclosure about
Market Risk ............................................ 35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 38
Item 4. Submission of Matters to a Vote of Shareholders ........ 38
Item 6. Exhibits and Reports on Form 8-K ....................... 38
Signatures 40
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XL CAPITAL LTD
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
---------------------------
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ -----------
A S S E T S
Investments:
Fixed maturities, at fair value (amortized
cost: 2001, $9,481,077; 2000, $8,714,196) .... $ 9,472,400 $ 8,605,081
Equity securities, at fair value (cost: 2001,
$548,939; 2000, $515,440) .................... 440,309 557,460
Short-term investments, at fair value
(amortized cost: 2001, $538,407;
2000, $347,147) .............................. 539,325 339,007
----------- -----------
Total investments available for sale ..... 10,452,034 9,501,548
Investments in affiliates ...................... 964,173 792,723
Other investments .............................. 253,656 177,651
----------- -----------
Total investments ........................ 11,669,863 10,471,922
Cash and cash equivalents ........................ 2,129,512 930,469
Accrued investment income ........................ 161,297 143,235
Deferred acquisition costs ....................... 380,761 309,268
Prepaid reinsurance premiums ..................... 879,549 391,789
Premiums receivable .............................. 2,096,168 1,119,723
Reinsurance balances receivable .................. 1,072,499 196,002
Unpaid losses and loss expenses recoverable ...... 4,647,552 1,339,767
Intangible assets (accumulated amortization:
2001, $179,692; 2000, $135,476) ................ 1,629,615 1,591,108
Deferred tax asset, net .......................... 203,180 152,168
Other assets ..................................... 795,432 296,501
----------- -----------
Total assets ............................. $25,665,428 $16,941,952
=========== ===========
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
Liabilities:
Unpaid losses and loss expenses .................. $11,288,036 $ 5,672,062
Deposit liabilities and policy benefit reserves .. 1,471,182 1,209,926
Unearned premiums ................................ 2,724,416 1,741,393
Notes payable and debt ........................... 1,561,207 450,032
Reinsurance balances payable ..................... 2,460,379 441,900
Net payable for investments purchased ............ 1,230,957 1,372,476
Other liabilities ................................ 100,651 439,433
Minority interest ................................ 41,800 41,062
----------- -----------
Total liabilities ....................... $20,878,628 $11,368,284
----------- -----------
Commitments and Contingencies
Shareholders' Equity:
Authorized, 999,990,000 ordinary shares,
par value $0.01
Issued and outstanding:
Ordinary shares (2001, 124,513,107;
2000, 125,020,676) .......................... $ 1,245 $ 1,250
Contributed surplus .............................. 2,520,098 2,497,416
Accumulated other comprehensive loss ............. (151,060) (104,712)
Deferred compensation ............................ (26,914) (17,727)
Retained earnings ................................ 2,443,431 3,197,441
----------- -----------
Total shareholders' equity .............. $ 4,786,800 $ 5,573,668
----------- -----------
Total liabilities and
shareholders' equity .................. $25,665,428 $16,941,952
=========== ===========
See accompanying notes to Unaudited Consolidated Financial Statements.
3
XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(U.S. DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- ---------------------------
2001 2000 2001 2000
----------------------- ---------------------------
Revenues:
Net premiums earned .................................... $ 751,524 $539,945 $ 1,934,662 $1,537,819
Net investment income .................................. 142,818 134,624 412,969 399,591
Net realized (losses) gains on investments ............. (64,635) 1,026 (35,536) 74,808
Equity in net income of affiliates ..................... 7,267 18,447 65,169 61,682
Fee income and other ................................... 7,990 539 26,552 8,835
--------- -------- ----------- ----------
Total revenues ................................. 844,964 694,581 2,403,816 2,082,735
--------- -------- ----------- ----------
Expenses:
Losses and loss expenses ............................... 1,403,045 338,000 2,120,200 969,374
Acquisition costs ...................................... 166,191 130,032 435,265 349,384
Operating expenses ..................................... 150,077 66,809 311,471 203,883
Interest expense ....................................... 18,926 7,822 42,238 23,719
Amortization of intangible assets ...................... 15,045 13,601 44,216 41,409
--------- -------- ----------- ----------
Total expenses .................................... 1,753,284 556,264 2,953,390 1,587,769
--------- -------- ----------- ----------
(Loss) income before minority interest and income tax ....... (908,320) 138,317 (549,574) 494,966
Minority interest in net (loss) income of subsidiary ... (390) (199) 127 528
Income tax benefit ..................................... (67,898) (945) (57,204) (11,266)
--------- -------- ----------- ----------
Net (loss) income ........................................... $(840,032) $139,461 $ (492,497) $ 505,704
--------- -------- ----------- ----------
Change in net unrealized depreciation of investments ........ 60,166 74 (49,540) (138,586)
Foreign currency translation adjustments .................... 36,674 (8,880) 3,192 (19,195)
--------- -------- ----------- ----------
Comprehensive (loss) income ................................. $(743,192) $130,655 $ (538,845) $ 347,923
========= ======== =========== ==========
Weighted average ordinary shares and ordinary share
equivalents outstanding-basic ............................ 125,431 124,008 125,358 124,563
========= ======== =========== ==========
Weighted average ordinary shares and ordinary share
equivalents outstanding - diluted ........................ 125,431 126,286 125,358 125,679
========= ======== =========== ==========
Earnings (loss) per ordinary share and ordinary share
equivalent-basic ......................................... $ (6.70) $ 1.12 $ (3.93) $ 4.06
========= ======== =========== ==========
Earnings (loss) per ordinary share and ordinary share
equivalent - diluted ..................................... $ (6.70) $ 1.10 $ (3.93) $ 4.02
========= ======== =========== ==========
See accompanying notes to Unaudited Consolidated Financial Statements.
4
XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Ordinary Shares:
Balance-beginning of year ................... $ 1,250 $ 1,278
Issue of shares ............................. 1 --
Exercise of stock options ................... 9 14
Repurchase of treasury shares ............... (15) (49)
----------- -----------
Balance-end of period .................. $ 1,245 $ 1,243
----------- -----------
Contributed Surplus:
Balance-beginning of year ................... $ 2,497,416 $ 2,520,136
Issue of shares ............................. 18,040 1,133
Exercise of stock options ................... 35,560 34,653
Repurchase of treasury shares ............... (30,918) (95,995)
----------- -----------
Balance-end of period .................. $ 2,520,098 $ 2,459,927
----------- -----------
Accumulated other comprehensive (loss) income:
Balance-beginning of year ................... $ (104,712) $ 19,311
Net change in unrealized losses on
investment portfolio, net of tax .......... (49,969) (132,296)
Net change in unrealized gains (losses)
on investment portfolio of affiliate ...... 429 (6,290)
Currency translation adjustments ............ 3,192 (19,125)
----------- -----------
Balance-end of period .................. $ (151,060) $ (138,400)
----------- -----------
Deferred Compensation:
Balance-beginning of year ................... $ (17,727) $ (28,797)
(Issue) forfeit of restricted shares ........ (16,652) 1,676
Amortization ................................ 7,465 6,013
----------- -----------
Balance-end of period .................. $ (26,914) $ (21,108)
----------- -----------
Retained Earnings:
Balance-beginning of year ................... $ 3,197,441 $ 3,065,150
Net (loss) income ........................... (492,497) 505,704
Cash dividends paid ......................... (175,313) (169,313)
Repurchase of treasury shares ............... (86,200) (136,636)
----------- -----------
Balance-end of period .................. $ 2,443,431 $ 3,264,905
----------- -----------
Total shareholders' equity ....................... $ 4,786,800 $ 5,566,567
=========== ===========
See accompanying notes to Unaudited Consolidated Financial Statements.
5
XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Cash flows provided by (used in)
operating activities:
Net (loss) income ........................... $ (492,497) $ 505,704
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Net realized losses (gains) on investments .. 35,536 (74,808)
Amortization of discounts on fixed
maturities ................................ (29,874) (35,801)
Equity in net income of affiliates .......... (65,169) (61,682)
Amortization of intangible assets ........... 44,216 41,409
Accretion of deposit liabilities and
policy reserves ........................... 57,671 71,509
Unpaid losses and loss expenses ............. 3,420,300 (43,191)
Unearned premiums ........................... 478,425 278,817
Premiums receivable ......................... 147,744 (86,515)
Unpaid losses and loss expenses
recoverable ............................... (2,306,026) (267,271)
Prepaid reinsurance premiums ................ (320,639) (180,872)
Reinsurance balances receivable ............. (856,291) 14,833
Deferred acquisition costs .................. (69,753) (47,917)
Other ....................................... 635,138 (69,554)
----------- -----------
Total adjustments ...................... 1,171,278 (461,043)
----------- -----------
Net cash provided by operating activities ... 678,781 44,661
----------- -----------
Cash flows provided by (used in)
investing activities:
Proceeds from sale of fixed maturities
and short-term investments ................ 20,671,325 17,942,935
Proceeds from redemption of fixed
maturities and short-term investments ..... 796,703 430,274
Proceeds from sale of equity securities ..... 753,636 1,136,214
Purchases of fixed maturities and
short-term investments .................... (21,476,665) (18,207,937)
Purchases of equity securities .............. (620,846) (837,356)
Investments in affiliates ................... (119,115) (135,407)
Acquisition of subsidiaries, net of
cash acquired ............................. (266,497) (3,094)
Other investments ........................... (76,581) (26,683)
Fixed assets and other ...................... (17,572) (29,507)
----------- -----------
Net cash (used in) provided by
investing activities ...................... (355,612) 269,439
----------- -----------
Cash flows provided by (used in)
financing activities:
Proceeds from exercise of share options ..... 35,569 34,667
Repurchase of treasury shares ............... (117,133) (232,680)
Dividends paid .............................. (175,313) (169,313)
Proceeds from loans ......................... 1,135,876 50,304
Repayment of loans .......................... (50,000) (11,000)
Deposit liabilities and policy
benefit reserves .......................... 47,365 386,318
----------- -----------
Net cash provided by financing activities ... 876,364 58,296
----------- -----------
Effects of exchange rate changes on foreign
currency cash .................................. (490) 1,357
----------- -----------
Increase in cash and cash equivalents ............ 1,199,043 373,753
Cash and cash equivalents-beginning of year ...... 930,469 557,749
----------- -----------
Cash and cash equivalents-end of period .......... $ 2,129,512 $ 931,502
=========== ===========
See accompanying notes to Unaudited Consolidated Financial Statements.
6
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
These unaudited consolidated financial statements include the accounts of
XL Capital Ltd and its subsidiaries (collectively referred to as the "Company")
and have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, these unaudited financial statements
reflect all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of financial position and results of
operations as at the end of and for the periods presented. The results of
operations for any interim period are not necessarily indicative of the results
for a full year. All significant intercompany accounts and transactions have
been eliminated. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. These estimates and
assumptions include the loss events of September 11, 2001, described in Note 5.
Actual results could differ from these estimates.
Effective July 1, 2001, the Company's results include the acquired
Winterthur International operations. See Note 6 for additional information.
2. ACCOUNTING POLICIES
For a full description of the Company's accounting policies, refer to the
Company's Form 10-K for the fiscal year ended December 31, 2000.
Effective January 1, 2001 the Company adopted Financial Accounting
Statement ("FAS") 133, "Accounting for Derivative Instruments and Hedging
Activities." Additional accounting policies relating to this statement are noted
below.
a) CREDIT DEFAULT SWAPS
During the third quarter of 2001, the Company changed its presentation of
credit default swaps in its Consolidated Statements of Income. Credit default
swaps issued by the Company meet the definition of a derivative under FAS 133.
Effective January 1, 2001, the Company has recorded these products at fair
value. Credit default swaps are considered, in substance, financial guaranty
contracts as the Company has the intent to hold them to maturity.
Fair value is dependent upon a number of factors, including changes in
interest rates, credit spreads and other market factors. The change in fair
value in a period is split between premiums, net losses and loss expenses, and
realized gains and losses. In previous quarters, the change in fair value was
included in fee income and other. The change resulting from movements in
interest rates is included in realized gains and losses as the credit default
swaps are not traded to realize this value. Other elements of the change in fair
value are based upon pricing established at the inception of the contract. There
was no effect on net income from this change in presentation.
b) WEATHER DERIVATIVES
Weather derivatives are recorded at fair value with the change included in
fee income and other.
3. ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued FAS 141, "Business
Combinations," and FAS 142, "Goodwill and Other Intangible Assets," in July,
2001. The Company has adopted these standards for the acquisition of Winterthur
International (see Note 6). FAS 141 addresses financial accounting and reporting
for the acquisition of other
7
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
3. ACCOUNTING PRONOUNCEMENTS (CONTINUED)
companies and is effective for transactions after June 30, 2001. FAS 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets both upon acquisition and after these assets have initially
been recognized in the financial statements. This standard is effective for
fiscal years beginning after December 15, 2001. The Company is currently in the
process of assessing the effect of the adoption of FAS 142 on its results of
operations, financial condition and liquidity.
4. SEGMENT INFORMATION
The Company is organized into three underwriting segments--insurance,
reinsurance and financial products and services--in addition to a corporate
segment that includes the investment operations of the Company. Lloyd's
syndicates are part of the insurance segment but are described separately as the
nature of the business written and the market in which the Lloyd's syndicates
underwrite are significantly different to the Company's other insurance
operations. The Company evaluates the performance of each segment based on
underwriting profit or loss. Certain business written by the Company has loss
experience generally characterized as low frequency and high severity. This may
result in volatility in both the Company's and an individual segment's results
and operational cash flows.
Other items of revenue and expenditure of the Company are not evaluated at
the segment level. In addition, the Company does not allocate assets by segment.
The following is an analysis of the underwriting profit or loss by segment,
together with a reconciliation of underwriting results to net income:
QUARTER ENDED SEPTEMBER 30, 2001
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- ----------- ------------ ----------
Net premiums earned ................ $ 401,118 $ 94,155 $ 242,998 $13,253 $ 751,524
Fee income and other ............... 8,593 (1,477) (5,175) 6,049 7,990
Net losses and loss expenses ....... 366,905 342,151 689,525 4,464 1,403,045
Acquisition costs .................. 54,833 37,835 72,545 978 166,191
Operating expenses ................. 70,652 5,625 21,078 10,813 108,168
Exchange (gains) losses ............ 6,400 (540) 1,337 -- 7,197
--------- --------- --------- ------- ----------
Underwriting (loss) profit ......... $ (89,079) $(292,393) $(546,662) $ 3,047 $ (925,087)
--------- --------- --------- -------
Net investment income ....................................................................... 142,818
Net realized losses on investments .......................................................... 64,635
Equity in net income of affiliates .......................................................... 7,267
Interest expense ............................................................................ 18,926
Amortization of intangible assets ........................................................... 15,045
Corporate operating expenses (1) ............................................................ 34,712
Minority interest ........................................................................... (390)
Income tax benefit .......................................................................... (67,898)
----------
Net loss .................................................................................... $(840,032)
==========
Loss and loss expense ratio ........ 91.5% 363.4% 283.8% 33.7% 186.7%
Underwriting expense ratio ......... 31.3% 46.2% 38.6% 89.0% 36.5%
--------- --------- --------- ------- ----------
Combined ratio ..................... 122.8% 409.6% 322.4% 122.7% 223.2%
========= ========= ========= ======= ==========
----------
(1) Corporate operating expenses include $14.0 million related to costs
incurred in the third quarter associated with the integration of
the acquired Winterthur International operations.
8
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
4. SEGMENT INFORMATION (CONTINUED)
QUARTER ENDED SEPTEMBER 30, 2000
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- --------- ------- ----------
Net premiums earned ................ $ 177,992 $ 93,378 $ 263,033 $ 5,542 $ 539,945
Fee income and other ............... 147 79 (1,461) 1,774 539
Net losses and loss expenses (1) ... 125,965 60,924 149,649 1,462 338,000
Acquisition costs .................. 31,402 29,109 68,412 1,109 130,032
Operating expenses ................. 21,134 8,528 17,802 5,261 52,725
Exchange (gains) losses ............ (2,555) (803) (377) -- (3,735)
--------- --------- --------- ------- ----------
Underwriting profit (loss) ......... $ 2,193 $ (4,301) $ 26,086 $ (516) $ 23,462
--------- --------- --------- -------
Net investment income ....................................................................... 134,624
Net realized gains on investments ........................................................... 1,026
Equity in net income of affiliates .......................................................... 18,447
Interest expense ............................................................................ 7,822
Amortization of intangible assets ........................................................... 13,601
Corporate operating expenses ................................................................ 17,819
Minority interest ........................................................................... (199)
Income tax .................................................................................. (945)
Net income .................................................................................. $ 139,461
==========
Loss and loss expense ratio (1) .... 70.8% 65.3% 56.9% 26.4% 62.6%
Underwriting expense ratio ......... 29.5% 40.3% 32.8% 114.9% 33.8%
--------- --------- --------- ------- ----------
Combined ratio ..................... 100.3% 105.6% 89.7% 141.3% 96.4%
========= ========= ========= ======= ==========
----------
(1) Net losses incurred for the insurance segment include, and the reinsurance
segment exclude, $11.2 million related to an intercompany stop loss
arrangement. Consolidated results are not affected by this arrangement. The
loss and loss expense ratio would have been 64.5% and 61.1% and the
underwriting profit would have been $13.4 million and $14.9 million in the
insurance and reinsurance segments, respectively, had this stop loss
arrangement not been in place.
9
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
4. SEGMENT INFORMATION (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2001
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- --------- ------- ----------
Net premiums earned ................ $ 799,968 $ 304,701 $ 802,265 $27,728 $1,934,662
Fee income and other ............... 13,240 (3,086) (5,024) 21,422 26,552
Net losses and loss expenses ....... 584,272 486,513 1,041,322 8,093 2,120,200
Acquisition costs .................. 111,004 103,534 218,271 2,456 435,265
Operating expenses ................. 125,248 17,381 60,853 29,033 232,515
Exchange losses .................... 5,214 2,047 6,374 -- 13,635
--------- --------- --------- ------- ----------
Underwriting (loss) profit ......... $ (12,530) $(307,860) $(529,579) $ 9,568 $ (840,401)
--------- --------- --------- ------- ----------
Net investment income ...................................................................... 412,969
Net realized losses on investments ......................................................... 35,536
Equity in net income of affiliates ......................................................... 65,169
Interest expense ........................................................................... 42,238
Amortization of intangible assets .......................................................... 44,216
Corporate operating expenses (1) ........................................................... 65,321
Minority interest .......................................................................... 127
Income tax benefit ......................................................................... (57,204)
----------
Net loss ................................................................................... $ (492,497)
==========
Loss and loss expense ratio ........ 73.0% 159.7% 129.8% 29.2% 109.6%
Underwriting expense ratio ......... 29.5% 39.7% 34.8% 113.6% 34.5%
--------- --------- --------- ------- ----------
Combined ratio ..................... 102.5% 199.4% 164.6% 142.8% 144.1%
========= ========= ========= ======= ==========
----------
(1) Corporate operating expenses include $14.0 million related to costs
incurred in the third quarter associated with the integration of
the acquired Winterthur International operations.
10
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
4. SEGMENT INFORMATION (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2000
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- --------- ------- ----------
Net premiums earned ................ $ 475,572 $ 291,598 $ 752,183 $18,466 $1,537,819
Fee income and other ............... 5,353 (3,654) (1,229) 8,365 8,835
Net losses and loss expenses (1) ... 303,557 204,614 456,498 4,705 969,374
Acquisition costs .................. 74,114 88,163 185,285 1,822 349,384
Operating expenses ................. 59,296 16,471 70,454 16,909 163,130
Exchange (gains) losses ............ (2,085) (3,197) 1,264 -- (4,018)
--------- --------- --------- ------- ----------
Underwriting profit (loss) ......... $ 46,043 $ (18,107) $ 37,453 $ 3,395 $ 68,784
--------- --------- --------- ------- ----------
Net investment income ...................................................................... 399,591
Net realized gains on investments .......................................................... 74,808
Equity in net income of affiliates ......................................................... 61,682
Interest expense ........................................................................... 23,719
Amortization of intangible assets .......................................................... 41,409
Corporate operating expenses ............................................................... 44,771
Minority interest .......................................................................... 528
Income tax ................................................................................. (11,266)
----------
Net income ................................................................................. $ 505,704
==========
Loss and loss expense ratio (1) .... 63.8% 70.2% 60.7% 25.5% 63.1%
Underwriting expense ratio ......... 28.1% 35.9% 34.0% 101.4% 33.3%
--------- --------- --------- ------- ----------
Combined ratio ..................... 91.9% 106.1% 94.7% 126.9% 96.4%
========= ========= ========= ======= ==========
----------
(1) Net losses incurred for the insurance segment include, and the reinsurance
segment exclude, $22.3 million related to an intercompany stop loss
arrangement. Consolidated results are not affected by this arrangement. The
loss and loss expense ratio would have been 59.1% and 63.7% and the
underwriting profit would have been $68.4 million and $15.1 million in the
insurance and reinsurance segments, respectively, had this stop loss
arrangement not been in place.
11
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
4. SEGMENT INFORMATION (CONTINUED)
The following tables summarize the Company's gross premiums written, net
premiums written and net premiums earned by line of business:
QUARTER ENDED SEPTEMBER 30, 2001
GROSS NET NET
PREMIUMS PREMIUMS PREMIUMS
WRITTEN WRITTEN EARNED
---------- --------- ---------
Casualty insurance ....................... $ 303,941 $ 161,648 $ 225,346
Casualty reinsurance ..................... 121,069 82,088 89,954
Property catastrophe ..................... 83,348 (66,896) (6,561)
Other property ........................... 308,406 95,238 145,853
Marine, energy, aviation and satellite ... 143,748 89,242 101,364
Lloyd's syndicates ....................... 101,982 70,274 94,155
Other .................................... 130,823 105,378 101,413
---------- --------- ---------
Total .................................... $1,193,317 $ 536,972 $ 751,524
========== ========= =========
QUARTER ENDED SEPTEMBER 30, 2000
GROSS NET NET
PREMIUMS PREMIUMS PREMIUMS
WRITTEN WRITTEN EARNED
---------- --------- ---------
Casualty insurance ....................... $ 190,337 $ 97,772 $ 87,945
Casualty reinsurance ..................... 84,972 67,037 104,781
Property catastrophe ..................... 30,997 15,422 35,328
Other property ........................... 157,211 113,825 105,797
Marine, energy, aviation and satellite ... 72,709 60,643 78,552
Lloyd's syndicates ....................... 104,339 90,398 93,378
Other .................................... 95,992 55,005 34,164
---------- --------- ---------
Total .................................... $ 736,557 $ 500,102 $ 539,945
========== ========= =========
12
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
4. SEGMENT INFORMATION (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2001
GROSS NET NET
PREMIUMS PREMIUMS PREMIUMS
WRITTEN WRITTEN EARNED
---------- --------- ----------
Casualty insurance ....................... $ 743,167 $ 443,618 $ 423,856
Casualty reinsurance ..................... 411,391 286,404 253,734
Property catastrophe ..................... 236,398 75,672 71,296
Other property ........................... 661,487 350,206 364,971
Marine, energy, aviation and satellite ... 398,413 241,609 212,792
Lloyd's syndicates ....................... 481,220 349,856 304,701
Other .................................... 417,933 351,013 303,312
---------- --------- ----------
Total .................................... $3,350,009 $2,098,378 $1,934,662
========== ========= ==========
NINE MONTHS ENDED SEPTEMBER 30, 2000
GROSS NET NET
PREMIUMS PREMIUMS PREMIUMS
WRITTEN WRITTEN EARNED
---------- ---------- ----------
Casualty insurance ....................... $ 424,875 $ 267,338 $ 245,847
Casualty reinsurance ..................... 342,765 246,153 297,007
Property catastrophe ..................... 155,828 134,039 100,964
Other property ........................... 443,897 330,681 279,980
Marine, energy, aviation and satellite ... 307,160 216,118 164,168
Lloyd's syndicates ....................... 399,945 260,379 291,598
Other .................................... 277,577 197,402 158,255
---------- ---------- ----------
Total .................................... $2,352,047 $1,652,110 $1,537,819
========== ========== ==========
The Company's Lloyd's syndicates write a variety of coverages encompassing
most of the above lines of business. Other premiums written and earned include
political risk, surety, bonding and warranty.
13
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
5. LOSS EVENTS OF SEPTEMBER 11, 2001
Terrorist loss events at the World Trade Center and in Washington, D.C. and
Pennsylvania on September 11, 2001 (collectively, "the September 11 event") are
estimated to have caused the largest ever man-made insured losses for the
property and casualty insurance industry. The Company has exposure to these
events with claims expected to arise mainly from its aviation, property,
personal accident and business interruption insurance and reinsurance coverages.
The Company has performed a detailed analysis of contracts it believes are
exposed to this event. The Company estimates losses incurred of $750 million,
net of reinsurance recoveries, based on preliminary reports and estimates of
loss and damage. While this is management's best estimate at this time, it could
change as more information becomes available.
The following is an analysis of the impact on the Company's results of
operations from the September 11 event for the quarter ended September 30, 2001:
FINANCIAL
PRODUCTS
LLOYD'S AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- --------- --------- ---------
Gross premium written .............. $ -- $ -- $ 85,000 $ -- $ 85,000
Reinsurance ceded .................. 3,900 21,400 198,000 -- 223,300
Net premiums earned ................ (3,900) (21,400) (85,000) -- (110,300)
Net losses and loss expenses ....... 101,100 211,900 437,000 -- 750,000
--------- --------- --------- --------- ---------
Underwriting loss .................. $(105,000) $(233,300) $(522,000) -- $(860,300)
--------- --------- --------- --------- ---------
Equity in net loss of affiliates ............................................................ (27,000)
Income tax .................................................................................. (72,300)
---------
Net loss .................................................................................... $(815,000)
=========
Net premiums earned relate to net reinstatement and adjustment premiums
which typically are received and paid when a catastrophic event occurs. A
premium is paid to reinstate coverage for the remaining life of the contract.
Net losses and loss expenses comprise gross claims of $1.85 billion with
estimated reinsurance recoveries of $1.1 billion, both excluding Winterthur
International, discussed below. Approximately 96% of the relevant reinsurers
currently fall into Standard & Poor's financial strength rating categories or
equivalent of A or better, with approximately 65% rated AA or better.
Winterthur International incurred gross losses of $321.0 million related to
the September 11 event, which the Company expects to recover from third-party
reinsurers or under the net loss reserve seasoning mechanism in the Sale and
Purchase Agreement (defined below), or a combination of the two. These losses
relate to business written by Winterthur International prior to June 30, 2001.
6. BUSINESS COMBINATIONS
On July 25, 2001, the Company completed the acquisition of Winterthur
International to extend its predominantly North American based large corporate
insurance business globally, and was therefore prepared to pay a premium above
net asset value. This was an all-cash transaction preliminarily valued at
approximately $405.6 million at that date. The preliminary purchase price of the
acquisition was based on audited financial statements as at December 31, 2000
for the business being acquired, and is subject to adjustment based on the
audited June 30, 2001 financial statements of Winterthur International. These
audited financial statements are not expected to be completed until 2002.
Results of operations of Winterthur International have been included from July
1, 2001, the date from which the economic interest was transferred to the
Company. The Company is protected through a net loss
14
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
6. BUSINESS COMBINATIONS (CONTINUED)
reserve seasoning mechanism as part of the Second Amended and Restated Agreement
for the Sale and Purchase of Winterthur International ("the Sale and Purchase
Agreement").
The acquisition has been accounted for under the purchase method of
accounting and, therefore, the identifiable assets and liabilities of Winterthur
International were recorded at their estimated fair value on June 30, 2001 based
on the unaudited financial statements prepared by the seller and provided to the
Company as at that time. The process of determining the fair value of such
assets and liabilities acquired, as required under purchase accounting, was
undertaken as follows. The purchase price was preliminarily allocated to the
acquired assets and liabilities, based upon their estimated fair value at June
30, 2001. The excess of the purchase price over acquired tangible net assets was
then applied to intangible assets with finite and indefinite lives. The
remaining purchase price excess over fair value was allocated to goodwill. Under
the terms of the Sale and Purchase Agreement, the net reserves relating to the
acquired Winterthur International operations will be adjusted in three years
based on loss development experience, collectible reinsurance, reinsurance
recoveries and certain other factors. The Company is also protected on the June
30, 2001 expiring business to a maximum combined ratio of 105%. The Company's
exposure to a deficiency in the net reserves and the run-off of expiring
business of the acquired Winterthur International operations, including by
reason of uncollectible reinsurance, is limited to $61.0 million. The Company's
estimate of the fair value of loss reserves is approximately $5.0 million less
than the carrying value at July 1, 2001. This difference will be charged to
income over the next six years. The Company has considered the $61.0 million
exposure in establishing its risk premium adjustment inherent in the fair value
of loss reserves.
The fair value of significant assets and liabilities acquired by the
Company include $1.4 billion of cash and invested assets, $1.1 billion of
reinsurance balances receivable, $1.0 billion of unpaid losses and loss expenses
recoverable, $2.2 billion of unpaid losses and loss expenses, $505.0 million of
unearned premiums and $556.0 million of reinsurance balances payable.
Allocation of the purchase price is as follows:
Fair value of assets acquired ............................. $4,230,022
Fair value of liabilites acquired ......................... 4,012,019
----------
Fair value of tangible net assets acquired ................ $ 218,003
Fair value of intangible assets acquired .................. 15,000
Goodwill related to the acquisition ....................... 54,894
----------
$ 287,897
----------
Preliminary purchase price ................................ $ 265,397
Other costs of acquisition ................................ 22,500
----------
$ 287,897
----------
Net cash paid, based on the preliminary purchase price, for the acquisition
was $245.9 million. The decrease in purchase price from $405.6 million at
December 31, 2000 reflects the decline in the net asset value of
WinterthurInternational as presented in the unaudited financial statements as at
June 30, 2001. The difference of $140.2 million, which is subject to final
adjustment upon completion of the audit, will be recoverable from the seller
when the audited financial statements at June 30, 2001 are available.
The Company has made a preliminary estimate of the value of intangible
assets acquired and estimates that $10.0 million relates to insurance licenses,
which have an indefinite life and are not therefore subject to
15
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS)
6. BUSINESS COMBINATIONS (CONTINUED)
amortization. The remaining $5.0 million relates to the value of business in
force, which is estimated to have a finite life of three to five years and is
being amortized over that period. These estimates will be subject to third party
evaluations during the fourth quarter of 2001.
The following unaudited pro forma financial information for the nine months
ended September 30, 2001 include the unaudited financial information for
Winterthur International for the nine months ended September 30, 2001 as if the
acquisition of the Winterthur International operations occurred on January 1,
2001. The unaudited pro forma financial information for the year ended December
31, 2000 includes the audited financial information for Winterthur International
for the year ended December 31, 2000 as if the acquisition occurred on January
1, 2000. Comparative information for Winterthur International for the nine
months ended September 30, 2000 is not available on a GAAP basis, therefore
pro forma information has been presented for the year ended December 31, 2000.
Winterthur International results of operations for the first six months of
2001 and the year ended December 31, 2000 included in the pro forma financial
information has not been adjusted for the contractual protection that the
Company has received from the seller with effect from July 1, 2001.
The pro forma financial information is based upon information currently
available and certain assumptions that the Company's management believes are
reasonable. The financial information of Winterthur International for both
periods presented is taken from the financial statements of the seller and were
prepared on a GAAP basis for the first time. The pro forma financial information
does not purport to represent what the Company's results of operations or
financial condition would have been had the transaction occurred on such dates
or to project the Company's results of operations or financial condition for any
future period or date. As a result of the above, the pro forma financial
information should be reviewed with caution and undue reliance should not be
placed on such information.
PRO FORMA PRO FORMA
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2001 2000
----------------- ------------
Total revenues ................................. $2,754,920 $3,344,274
Net (loss) income .............................. $ (700,681) $ 486,522
(Loss) earnings per ordinary share - Basic ..... $ (5.59) $ 3.91
(Loss) earnings per ordinary share - Diluted ... $ (5.59) $ 3.87
7. NOTES PAYABLE AND DEBT AND FINANCING ARRANGEMENTS
In September 2001, the Company issued Liquid Yield Option(TM) Notes due
2021 with a yield to maturity of 2.875%. The gross proceeds to the Company were
$250.0 million. Funds were received net of $5.6 million of related expenses that
were capitalized and will be expensed up to the first call date, which is one
year. Proceeds of the debt were used to repurchase $66.4 million of the
Company's ordinary shares. The remainder of the proceeds of the debt will be
used for additional share repurchases and general corporate purposes, which
includes the settlement of claims from the September 11 event.
16
XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. COMPUTATION OF EARNINGS PER ORDINARY SHARE AND ORDINARY SHARE EQUIVALENT
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
BASIC EARNINGS PER SHARE:
Net (loss) income ....................................... $(840,032) $139,461 $ (492,497) $ 505,704
Weighted average ordinary shares outstanding ............ 125,431 124,008 125,358 124,563
Basic (loss) earnings per share ......................... $ (6.70) $ 1.12 $ (3.93) $ 4.06
========= ======== =========== ==========
DILUTED EARNINGS PER SHARE:
Net (loss) income ....................................... $(840,032) $139,461 $ (492,497) $ 505,704
Weighted average ordinary shares outstanding--basic ..... 125,431 124,008 125,358 124,563
Average stock options outstanding (1)(2)................. -- 2,278 -- 1,116
--------- -------- ----------- ----------
Weighted average ordinary shares outstanding--diluted ... 125,431 126,286 125,358 125,679
--------- -------- ----------- ----------
Diluted (loss) earnings per share ....................... $ (6.70) $ 1.10 $ (3.93) $ 4.02
========= ======== =========== ==========
DIVIDENDS PER SHARE ..................................... $ 0.46 $ 0.45 $ 1.38 $ 1.35
========= ======== =========== ==========
----------
(1) Net of shares repurchased under the treasury stock method.
(2) Average stock options outstanding have been excluded where antidilutive to
earnings per share.
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
This "Management's Discussion and Analysis of Results of Operations and
Financial Condition" contains forward-looking statements which involve inherent
risks and uncertainties. Statements that are not historical facts, including
statements about the Company's beliefs and expectations, are forward-looking
statements. These statements are based upon current plans, estimates and
projections. Actual results may differ materially from those projected in such
forward-looking statements, and therefore you should not place undue reliance on
them. See Item 3. "Cautionary Note Regarding Forward-Looking Statements" for a
list of factors that could cause actual results to differ materially from those
contained in any forward-looking statement.
This discussion and analysis should be read in conjunction with the
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," and the audited Consolidated Financial Statements and notes thereto
presented under Item 7 and Item 8, respectively, of the Company's Form 10-K for
the year ended December 31, 2000.
Effective July 1, 2001, the Company's results include the results of
Winterthur International and the September 11 event. Consequently, period to
period comparisons may not be meaningful.
RESULTS OF OPERATIONS
The following table presents an after-tax analysis of the Company's net
(loss) income and (loss) earnings per share for the three months ended September
30, 2001 and 2000:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
---------------------
2001 2000
-------- --------
Net operating (loss) income (excluding net
realized gains and losses on investments and
one-time charges) ................................... $(761,840) $138,333
One-time charges (1) .................................. (14,000) --
Net realized (losses) gains on investments ............ (64,192) 1,128
-------- --------
Net (loss) income ..................................... $(840,032) $139,461
======== ========
(Loss) earnings per share--basic ...................... $ (6.70) $ 1.12
(Loss) earnings per share--diluted .................... $ (6.70) $ 1.10
----------
(1) One-time charges related to the integration of Winterthur International.
Net operating income decreased significantly in the third quarter of 2001
compared to the third quarter of 2000 primarily due to net losses arising from
the September 11 event, which reduced net income after-tax by approximately
$815.0 million (see Note 5 to the Consolidated Financial Statements). Losses
were mainly incurred on the property, aviation, personal accident and business
interruption lines. Both the insurance and reinsurance segments were affected by
this event. The effect of the September 11 event is exhibited below on a segment
basis.
18
The following is an analysis of the underwriting profit or loss by segment
for the quarter ended September 30, 2001, first including the effects of the
September 11 event and then excluding the effect of the September 11 event:
QUARTER ENDED SEPTEMBER 30, 2001 INCLUDING THE EFFECTS OF THE SEPTEMBER 11 EVENT
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- ---------- ----------- ------------ -----------
Net premiums earned ............... $ 401,118 $ 94,155 $ 242,998 $13,253 $ 751,524
Fee income and other .............. 8,593 (1,477) (5,175) 6,049 7,990
Net losses and loss expenses ...... 366,905 342,151 689,525 4,464 1,403,045
Acquisition costs ................. 54,833 37,835 72,545 978 166,191
Operating expenses ................ 70,652 5,625 21,078 10,813 108,168
Exchange (gains) losses ........... 6,400 (540) 1,337 -- 7,197
--------- --------- --------- ------- -----------
Underwriting (loss) profit ........ $ (89,079) $(292,393) $(546,662) $ 3,047 $ (925,087)
--------- --------- --------- ------- -----------
Loss and loss expense ratio ....... 91.5% 363.4% 283.8% 33.7% 186.7%
Underwriting expense ratio ........ 31.3% 46.2% 38.6% 89.0% 36.5%
--------- --------- --------- ------- -----------
Combined ratio .................... 122.8% 409.6% 322.4% 122.7% 223.2%
--------- --------- --------- ------- -----------
QUARTER ENDED SEPTEMBER 30, 2001 EXCLUDING THE EFFECTS OF THE SEPTEMBER 11 EVENT
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- ---------- ----------- ------------ -----------
Net premiums earned ................ $405,018 $115,555 $327,998 $13,253 $861,824
Fee income and other ............... 8,593 (1,477) (5,175) 6,049 7,990
Net losses and loss expenses ....... 265,805 130,251 252,525 4,464 653,045
Acquisition costs .................. 54,833 37,835 72,545 978 166,191
Operating expenses ................. 70,652 5,625 21,078 10,813 108,168
Exchange (gains) losses ............ 6,400 (540) 1,337 -- 7,197
--------- --------- --------- ------- -----------
Underwriting (loss) profit ......... $ 15,921 $(59,093) $(24,662) $3,047 $(64,787)
--------- --------- --------- ------- -----------
Loss and loss expense ratio ........ 65.6% 112.7% 77.0% 33.7% 75.8%
Underwriting expense ratio ......... 31.0% 37.6% 28.5% 89.0% 31.8%
--------- --------- --------- ------- -----------
Combined ratio ..................... 96.6% 150.3% 105.5% 122.7% 107.6%
--------- --------- --------- ------- -----------
In addition to the effect of the September 11 event, net losses related to
the Sri Lanka airport loss event, two satellite losses, the Toulouse
petrochemical plant explosion and net deterioration of loss development of prior
underwriting years reduced net income after-tax in the quarter ended September
30, 2001 by a further $103.7 million. The components of these loss events are
discussed within each segment. There were no significant catastrophic loss
events in the quarter ended September 30, 2000.
Underwriting results are discussed in further detail in each of the
following segments.
SEGMENTS
The Company is organized into three underwriting segments - insurance,
reinsurance and financial products and services--in addition to a corporate
segment, which includes the investment operations of the Company. Lloyd's
syndicates are part of the insurance segment but are described separately as the
nature of the business written and the market in which the Lloyd's syndicates
underwrite are significantly different from the Company's other insurance
operations. Underwriting profit or loss is determined on a pre-tax basis. The
results of each segment are discussed below.
19
The calculations of the underwriting ratios for all segments follow. The
combined ratio is the sum of the loss and loss expense ratio and the
underwriting expense ratio. The loss and loss expense ratio is calculated by
dividing net losses and loss expenses by net premiums earned, and the
underwriting expense ratio is calculated by dividing the total of acquisition
costs and operating expenses by net premiums earned.
INSURANCE OPERATIONS--EXCLUDING LLOYD'S SYNDICATES
Insurance business written includes general liability, other liability
including directors and officers, professional and employment practices
liability, environmental liability, property, program business, marine,
aviation, satellite and other product lines including U.S. Customs bonds,
surety, political risk and specialty lines.
The following table summarizes the underwriting results for this segment:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- -------
Net premiums earned .................. $ 401,118 $ 177,992 125.4%
Fee income and other ................. 8,593 147 NM
Net losses and loss expenses ......... 366,905 125,965 191.3%
Acquisition costs .................... 54,833 31,402 74.6%
Operating expenses ................... 70,652 21,134 234.3%
Exchange losses (gains) .............. 6,400 (2,555) NM
--------- --------- -----
Underwriting (loss) profit ........... $ (89,079) $ 2,193 NM
========= ========= =====
----------
* NM - Not Meaningful
Effective July 1, 2001, the insurance segment includes the results of
Winterthur International. Each of the above line items experienced growth
primarily as a result of the inclusion of business written and earned by
Winterthur International. Consequently, period to period comparisons may not be
meaningful.
Net premiums earned included $181.1 million from Winterthur International
in the quarter ended September 30, 2001. Net premiums earned also increased in
the quarter ended September 30, 2001 compared to the same quarter in 2000 due to
growth in large corporate insurance business, professional lines, aviation and
marine of approximately $74.0 million in gross premiums written. This growth
reflects the continuation of both new business and price increases already seen
in previous quarters due to improving market conditions. Net premiums earned
reflect the earning of these premiums written previously. Due to September 11
event, reinstatement premiums of $3.9 million were ceded and expensed during the
quarter ended September 30, 2001.
Fee income and other for the quarter ended September 30, 2001 related
primarily to Winterthur International, included for the first time.
The following table presents the ratios for the insurance segment:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio .......... 91.5% 70.8%
Underwriting expense ratio ........... 31.3% 29.5%
----------- -----------
Combined ratio ....................... 122.8% 100.3%
=========== ===========
The loss ratio was significantly higher in the quarter ended September 30,
2001 compared to the same period of 2000 due to net losses of $101.1 million
incurred related to the September 11 event, and approximately $15.0 million
related to two satellite losses. There were no significant catastrophic loss
events in the quarter ended September 30, 2000. The loss ratio in the quarter
ended September 30, 2001 was increased by the inclusion of losses related to
premiums earned by Winterthur International. Net losses incurred by Winterthur
International for the quarter were $128.9
20
million. In addition, the Company experienced some favorable development in
prior underwriting years in the quarter ended September 30, 2001.
As described in Note 6 to the Consolidated Financial Statements, the
accounting for the purchase of Winterthur International required the Company to
fair value the acquired assets and liabilities on June 30, 2001. The fair value
adjustment to the loss reserves resulted in an accretion of discount for the
quarter ended September 30, 2001 of $0.7 million. The Company has contractual
post-closing protection with respect to adverse development of reserves
(including unearned premium reserves) resulting from Winterthur International
business written prior to July 1, 2001. June 30, 2001 expiring business carries
a maximum exposure to a combined ratio of 105%.
Net losses and loss expenses in the third quarter of 2000 included $11.2
million related to an intercompany stop loss arrangement. The loss and loss
expense ratio would have been 64.5% had this arrangement not been in place.
There was no such arrangement in effect for 2001.
The underwriting expense ratio increased slightly in the third quarter of
2001 compared to the third quarter of 2000 due to the transfer of certain
operating expenses from the reinsurance segment to the insurance segment and a
general expansion of operations. Winterthur International acquisition costs and
operating expenses were $13.0 million and $38.6 million, respectively,
representing an expense ratio of 28.3%. The expense ratio has been reduced by
the effect of purchase accounting treatment on the acquisition costs of
Winterthur International. Had an historical level of deferred acquisition costs
been amortized, the expense ratio would have been 33.6% in the quarter ended
September 30, 2001.
INSURANCE OPERATIONS--LLOYD'S SYNDICATES
The Lloyd's syndicates write property, marine and energy, aviation and
satellite, professional indemnity, personal accident, liability coverage and
other specialty lines, primarily of insurance but also reinsurance.
The following table summarizes the underwriting loss for the Lloyd's
syndicates:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- -------
Net premiums earned .................. $ 94,155 $ 93,378 0.8%
Fee income and other ................. (1,477) 79 NM
Net losses and loss expenses ......... 342,151 60,924 NM
Acquisition costs .................... 37,835 29,109 30.0%
Operating expenses ................... 5,625 8,528 (34.0)%
Exchange gains ....................... (540) (803) (32.8)%
--------- --------- -------
Underwriting loss .................... $(292,393) $ (4,301) NM
========= ========= =======
Net premiums earned for the third quarter of 2001 compared to the third
quarter of 2000 were relatively unchanged. However, reinstatement premiums
related to the September 11 event were expensed in the quarter ended September
30, 2001, reducing net premiums earned by $21.4 million. Excluding the effect of
reinstatement premiums, the increase arose from higher premiums written
throughout 2001 principally due to an increase in syndicate capacity.
The Company's Lloyd's managing agencies earn fees and may, dependent upon
underwriting results, earn profit commissions from the syndicates they manage in
order to offset their operating expenses. No commissions were earned in the
third quarter of 2001 due to loss deterioration in the Lloyd's market, resulting
in expenses in excess of fee income.
21
The following table presents the ratios for the Lloyd's syndicates:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 363.4% 65.3%
Underwriting expense ratio ............ 46.2% 40.3%
----------- -----------
Combined ratio ........................ 409.6% 105.6%
=========== ===========
The loss and loss expense ratio increased in the third quarter of 2001
compared to the quarter of 2000 primarily due to net losses incurred for the
September 11 event of approximately $211.9 million and the Toulouse
petrochemical plant explosion and the airport loss event in Sri Lanka totaling
approximately $19.0 million. In addition, the Company experienced loss
deterioration on business written in previous underwriting years of
approximately $35.0 million. The underwriting expense ratio was higher in the
third quarter of 2001 compared to the same quarter of 2000 due primarily to the
negative effect of reinstatement premiums on net premiums earned.
REINSURANCE OPERATIONS
Reinsurance business written includes treaty and facultative reinsurance to
primary insurers of casualty risks, principally general liability, professional
liability, automobile and workers' compensation, commercial and personal
property risks, specialty risks including fidelity and surety and ocean marine,
property catastrophe, property excess of loss, property pro-rata, marine and
energy, aviation and satellite, and various other reinsurance to insurers on a
worldwide basis. The Company manages its exposures to catastrophic events by,
among other things, limiting the amount of its exposure in each geographic zone
worldwide and requiring that its property catastrophe contracts provide for
aggregate limits and varying attachment points.
The following table summarizes the underwriting results for this segment:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Net premiums earned .................. $ 242,998 $ 263,033 (7.6)%
Fee income and other ................. (5,175) (1,461) NM
Net losses and loss expenses ......... 689,525 149,649 NM
Acquisition costs .................... 72,545 68,412 6.0%
Operating expenses ................... 21,078 17,802 18.4%
Exchange losses (gains) .............. 1,337 (377) NM
--------- --------- --------
Underwriting (loss) profit ........... $(546,662) $ 26,086 NM
========= ========= ========
Net premiums earned in the third quarter of 2001 were reduced by
approximately $85.0 million related to net reinstatement premiums as a result of
the September 11 event. As previously noted, reinstatement premiums typically
are received and paid when a catastrophic event occurs that results in a loss
under a particular insurance or reinsurance contract. An insured pays a premium
to reinstate coverage for the remaining life of the contract. As a result of
these reinstatement premiums, the Company still has in place a full range of
coverage protections with the exception of aviation where coverage has been
partially depleted. The effect of reinstatement premiums in the quarter ended
September 30, 2001 was partially offset by additional premium earned related to
an increase in premiums written in the property lines due to continued increases
in premium rates throughout 2001.
22
The following table presents the ratios for the reinsurance segment:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 283.8% 56.9%
Underwriting expense ratio ............ 38.6% 32.8%
----------- -----------
Combined ratio ........................ 322.4% 89.7%
=========== ===========
Net losses and loss expenses in the third quarter of 2001 include $437.0
million related to the September 11 event, mainly on the Company's property and
aviation reinsurance business written. In addition, net losses include
approximately $10.0 million related to the Sri Lanka airport loss event in the
third quarter of 2001 and $58.0 million in reserve strengthening on prior years
identified through the Company's actuarial review process. There were no
comparable catastrophic loss events in the third quarter 2000. 2000 third
quarter losses exclude $11.2 million related to an intercompany stop loss
arrangement. There was no such arrangement in place for 2001. The loss and loss
expense ratio would have been 61.1% in the third quarter of 2000 had this
arrangement not been in place.
The underwriting expense ratio is higher in the third quarter of 2001
compared to the third quarter of 2000 due primarily to the negative effect of
reinstatement premiums on the net premiums earned.
FINANCIAL PRODUCTS AND SERVICES
Financial products and services business written includes insurance and
reinsurance solutions for complex financial risks. These include financial
guaranty insurance and reinsurance, credit default swaps and other
collateralized transactions. The Company's intent is to write and hold all
credit default swaps to maturity. In 2001, the Company also began to write
weather-related products. While each of these transactions is unique and is
tailored for the specific needs of the insured, they are typically multi-year
transactions. Due to the nature of these types of policies, premium volume as
well as profit margin can vary significantly from period to period. Managing
weather risk is a distinct business of the Company and is accomplished through
the trading of these derivatives.
Financial guaranties are conditional commitments that guarantee the
performance of a customer to a third party. The Company's potential liability in
the event of non-performance by the issuer of the insured obligation is
represented by its proportionate share of the aggregate outstanding principal
and interest payable ("insurance in force") on such insured obligation. At
September 30, 2001, the Company's aggregate insurance in force was approximately
$21.6 billion.
The following table summarizes the underwriting results for this segment:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Net premiums earned .................. $ 13,253 $ 5,542 139.1%
Fee income and other ................. 6,049 1,774 NM
Net losses and loss expenses ......... 4,464 1,462 NM
Acquisition costs .................... 978 1,109 (11.8)%
Operating expenses ................... 10,813 5,261 105.5%
--------- --------- -------
Underwriting profit (loss) ........... $ 3,047 $ (516) NM
--------- --------- -------
Unrealized losses on
credit default swaps ............... $ 13,012 $ -- NM
========= ========= =======
The increase in net premiums earned primarily reflects the inclusion of a
component of fair value changes related to credit default swaps. Prior to the
quarter ended September 30, 2001, all adjustments to the fair value of credit
default swaps were included in fee income and other. There was no effect on net
income from this change in presentation.
23
Fee income for the quarter ended September 30, 2001 included trading gains
related to and the change in fair value of weather derivatives, reflecting the
continued growth in this business.
The following table presents the combined ratios for this segment:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 33.7% 26.4%
Underwriting expense ratio ............ 89.0% 114.9%
----------- -----------
Combined ratio ........................ 122.7% 141.3%
=========== ===========
The Company's financial guaranty operations write business with an expected
loss ratio of approximately 25%. The increase in the loss ratio represents the
effect of the reclassification of the loss component of the change in fair value
on the credit default swaps. The underwriting expense ratio decreased due to the
increase in net premiums earned as a result of the change in presentation noted
above.
INVESTMENT OPERATIONS
The following table illustrates the change in net investment income and net
realized (losses) gains on investments for the quarters ended September 30, 2001
and 2000:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
---------------------
2001 2000 % CHANGE
--------- --------- --------
Net investment income ......................... $ 142,818 $ 134,624 6.1%
Net realized (losses) gains on investments .... $ (64,635) $ 1,026 NM
Net investment income increased in the third quarter of 2001 as compared to
the third quarter of 2000 due primarily to interest on the investment of net
funds of $1.1 billion related to new debt issued by the Company during the
second and third quarters of 2001 and investment income on the assets received
from the acquired Winterthur International operations. This interest was
partially offset by a reduction in investment yields for the three months ended
September 30, 2001 compared to the three months ended September 30, 2000. A
significant amount of the debt proceeds were held in cash and cash equivalents,
which has a lower yield than fixed income investments, initially to fund share
buybacks and the acquisition of Winterthur International, and subsequent to the
September 11 event, to meet claim payments as they come due. It is anticipated
that investment income will decrease in the future as invested assets are drawn
upon to meet claim obligations with respect to the September 11 event.
Assets related to deposit liabilities are included in investments available
for sale. Interest earned on these assets is reduced by the investment expense
related to the accretion of deposit liabilities.
Net realized losses on investments in the third quarter of 2001 included a
loss of approximately $53.3 million related to a write-down of certain of the
Company's fixed income, equity and other investments in circumstances where the
Company believed that there was an other than temporary decline in the value of
those investments.
24
OTHER REVENUES AND EXPENSES
The following table sets forth other revenues and expenses for the quarters
ended September 30, 2001 and 2000:
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Equity in net income of affiliates ... $ 7,267 $ 18,447 (60.6)%
Amortization of intangible assets .... 15,045 13,601 10.6%
Corporate operating expenses ......... 34,712 17,819 94.8%
Interest expense ..................... 18,926 7,822 142.0%
Minority interest .................... (390) (199) 96.0%
Income tax benefit ................... (67,898) (945) NM
The decrease in equity in net income of affiliates for the quarter ended
September 30, 2001 compared to the quarter ended September 30, 2000 is primarily
attributable to a loss of $27.0 million arising from the Company's share of the
loss in Le Mans Re related to the September 11 event. This was offset by an
increase in returns on the Company's investments in closed-end investment funds
and the management companies that administer these investment funds.
The increase in corporate operating expenses in the quarter ended September
30, 2001 included a one-time charge of $14.0 million for integration costs
related to the acquisition of Winterthur International. Excluding the effects of
the one-time charge, corporate operating expenses for the three months ended
September 30, 2001 have increased compared to the three months ended September
30, 2000 due to the increase in corporate infrastructure necessary to support
the expanding worldwide operations of the Company.
The increase in interest expense reflects an increase in indebtedness from
new debt issued by the Company during the second and third quarters of 2001. The
Company's financing structure is outlined in "Financial Condition and
Liquidity."
The change in the income tax benefit of the Company primarily reflects the
effects of losses incurred related to the September 11 event in the quarter
ended September 30, 2001.
25
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Effective July 1, 2001, the Company's results include the results of
Winterthur International and the September 11 event. Consequently, period to
period comparisons may not be meaningful.
RESULTS OF OPERATIONS
The following table presents an after-tax analysis of the Company's net
income and earnings per share for the nine months ended September 30, 2001 and
2000:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
2001 2000
--------- --------
Net operating (loss) income (excluding net
realized gains and losses on investments
and one-time charges) ............................... $(445,044) $424,625
One-time charges (1) .................................. (14,000) --
Net realized (losses) gains on investments ............ (33,453) 81,079
--------- --------
Net (loss) income ..................................... $(492,497) $505,704
========= ========
(Loss) earnings per share--basic ...................... $(3.93) $4.06
(Loss) earnings per share--diluted .................... $(3.93) $4.02
----------
(1) One-time charges relate to the integration of Winterthur International.
Net operating income decreased significantly in the first nine months of
2001 compared to the first nine months of 2000 primarily due to net losses
arising from the September 11 event, which reduced net income after-tax by
approximately $815.0 million (see "Results of Operations for the Three Months
Ended September 30, 2001"). These losses were primarily incurred on property,
aviation, personal accident and business interruption lines. Both the insurance
and reinsurance segments were affected by this event. In addition, net losses
incurred in the first nine months of 2001 included the Sri Lanka airport loss
event, satellite losses, the Toulouse petrochemical plant explosion, the
Petrobras oil rig and Tropical Storm Allison. The components of these net losses
are discussed within the segment management discussion and analysis for the
third quarter. There were no comparable loss events in the nine months ended
September 30, 2000.
Underwriting results are discussed in further detail in each of the
following segments.
26
The following is an analysis of the underwriting profit or loss by segment
for the nine months ended September 30, 2001, first including the effects of the
September 11 event and then excluding the effect of the September 11 event:
NINE MONTHS ENDED SEPTEMBER 30, 2001 INCLUDING THE EFFECTS
OF THE SEPTEMBER 11 EVENT
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- ----------- ------------ ----------
Net premiums earned .............. $ 799,968 $ 304,701 $ 802,265 $27,728 $1,934,662
Fee income and other ............. 13,240 (3,086) (5,024) 21,422 26,552
Net losses and loss expenses ..... 584,272 486,513 1,041,322 8,093 2,120,200
Acquisition costs ................ 111,004 103,534 218,271 2,456 435,265
Operating expenses ............... 125,248 17,381 60,853 29,033 232,515
Exchange losses .................. 5,214 2,047 6,374 -- 13,635
--------- --------- --------- ------- ----------
Underwriting (loss) profit ....... $ (12,530) $(307,860) $(529,579) $ 9,568 $ (840,401)
--------- --------- --------- ------- ----------
Loss and loss expense ratio ...... 73.0% 159.7% 129.8% 29.2% 109.6%
Underwriting expense ratio ....... 29.5% 39.7% 34.8% 113.6% 34.5%
--------- --------- --------- ------- ----------
Combined ratio ................... 102.5% 199.4% 164.6% 142.8% 144.1%
========= ========= ========= ======= ==========
NINE MONTHS ENDED SEPTEMBER 30, 2001 EXCLUDING THE EFFECTS
OF THE SEPTEMBER 11 EVENT
FINANCIAL
LLOYD'S PRODUCTS AND
INSURANCE SYNDICATES REINSURANCE SERVICES TOTAL
--------- --------- ----------- ------------ ----------
Net premiums earned .............. $ 803,868 $ 326,101 $ 887,265 $27,728 $2,044,962
Fee income and other ............. 13,240 (3,086) (5,024) 21,422 26,552
Net losses and loss expenses ..... 483,172 274,613 604,322 8,093 1,370,200
Acquisition costs ................ 111,004 103,534 218,271 2,456 435,265
Operating expenses ............... 125,248 17,381 60,853 29,033 232,515
Exchange losses .................. 5,214 2,047 6,374 -- 13,635
--------- --------- --------- ------- ----------
Underwriting profit (loss) ....... $ 92,470 $ (74,560) $ (7,579) $ 9,568 $ 19,899
--------- --------- --------- ------- ----------
Loss and loss expense ratio ...... 60.1% 84.2% 68.1% 29.2% 67.0%
Underwriting expense ratio ....... 29.4% 37.1% 31.5% 113.6% 32.7%
--------- --------- --------- ------- ----------
Combined ratio ................... 89.5% 121.3% 99.6% 142.8% 99.7%
========= ========= ========= ======= ==========
INSURANCE OPERATIONS--EXCLUDING LLOYD'S SYNDICATES
The following table summarizes the underwriting results for this segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Net premiums earned .................. $ 799,968 $ 475,572 68.2%
Fee income and other ................. 13,240 5,353 147.3%
Net losses and loss expenses ......... 584,272 303,557 92.5%
Acquisition costs .................... 111,004 74,114 50.0%
Operating expenses ................... 125,248 59,296 111.2%
Exchange losses (gains) .............. 5,214 (2,085) NM
--------- --------- -------
Underwriting (loss) profit ........... $ (12,530) $ 46,043 NM
========= ========= =======
27
Effective July 1, 2001, the insurance segment includes the results of
Winterthur International. Each of the above line items experienced growth as a
result of the inclusion of business written and earned by Winterthur
International. Consequently, period to period comparisons may not be meaningful.
Net premiums earned increased in the nine months ended September 30, 2001
compared to the nine months ended September 30, 2000 due to new business written
and price increases in environmental, professional liability and directors and
officers liability line. Excluding Winterthur International this amounted to
approximately $384.0 million of additional gross premiums written and $143.0
million of additional net premiums earned. In addition, the three months ended
September 30, 2001 included $181.0 million of net premiums earned by Winterthur
International.
Fee income and other in the nine months ended September 30, 2001 includes
approximately $5.1 million related to Winterthur International.
The following table presents the ratios for the insurance segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 73.0% 63.8%
Underwriting expense ratio ............ 29.5% 28.1%
----------- -----------
Combined ratio ........................ 102.5% 91.9%
=========== ===========
The loss ratio was significantly higher in the nine months ended September
30, 2001 compared to the same period of 2000 due primarily to net losses of
$101.1 million incurred related to the September 11 event and approximately
$15.0 million related to two satellite losses, both of which occurred during the
quarter ended September 30, 2001. There were no significant catastrophic loss
events in the nine months ended September 30, 2000. In addition, the loss ratio
was increased by the inclusion of losses related to premium earned by Winterthur
International in the three months ended September 30, 2001. Further discussion
of Winterthur International's ratios is provided in the insurance segment's
third quarter management discussion and analysis. In addition, the Company
experienced some favorable development in prior underwriting years in the nine
month period ended September 30, 2001.
The loss and loss expense ratio for the nine months ended September 30,
2000 was affected by an intercompany stop loss arrangement with a subsidiary in
the reinsurance segment. In the nine months ended September 30, 2000, $22.3
million of losses were included in the insurance segment and excluded from the
reinsurance segment. The loss and loss expense ratio in 2000 would have been
59.1% had this arrangement not been in place.
The increase in the underwriting expense ratio is due to the transfer of
certain operating expenses from the reinsurance segment to the insurance segment
and a general expansion of operations. The expense ratio has been reduced by the
effect of purchase accounting treatment on the acquisition costs of Winterthur
International. See further discussion in the third quarter management discussion
and analysis.
28
INSURANCE OPERATIONS--LLOYD'S SYNDICATES
The following table summarizes the underwriting loss for the Lloyd's
syndicates:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Net premiums earned .................. $ 304,701 $ 291,598 4.5%
Fee income and other ................. (3,086) (3,654) 15.5%
Net losses and loss expenses ......... 486,513 204,614 137.8%
Acquisition costs .................... 103,534 88,163 17.4%
Operating expenses ................... 17,381 16,471 5.5%
Exchange losses (gains) .............. 2,047 (3,197) NM
--------- --------- -------
Underwriting loss .................... $(307,860) $ (18,107) NM
========= ========= =======
Net premiums earned for the first nine months of 2001 increased from the
first nine months of 2000 based upon the increase of premiums written in the
first nine months primarily as a result of additional owned capacity, currently
at 63% compared to 53% in the prior year. The increase in net earned premiums
was offset by the reinstatement premiums of $21.4 million as a result of losses
realized from the September 11 event.
The Company's Lloyd's managing agencies earn fees and may, dependent upon
underwriting results, earn profit commissions from syndicates they manage in
order to offset their operating expenses. Although nominal commissions were
received in the first nine months of 2001, due to loss deterioration in the
Lloyd's market, managing agency expenses exceeded fee income and commissions for
the nine months ended September 30, 2001 and 2000.
The exchange loss in the first nine months of 2001 is due to the decrease
in the U.K. sterling exchange rate against the U.S. dollar applied to net
monetary assets denominated in U.K. sterling. Conversely, in the first nine
months of 2000, the exchange rate moved in the opposite direction.
The following table presents the ratios for this segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 159.7% 70.2%
Underwriting expense ratio ............ 39.7% 35.9%
----------- -----------
Combined ratio ........................ 199.4% 106.1%
=========== ===========
The loss and loss expense ratio increased for the nine months ended
September 30, 2001 compared to the nine months ended September 30, 2000
primarily due to losses incurred by the September 11 event, the Toulouse
petrochemical plant explosion and the Petrobras oil platform loss. The Company
has also experienced some adverse loss development on business written in
previous underwriting years. The increase in operating expenses also reflected
the increase in the syndicates' capacity provided by the Company and therefore,
a greater proportion of expenses is allocated to the Company. In addition, the
underwriting expense ratio is higher in the first nine months of 2001 compared
to the first nine months of 2000 due primarily to the negative effect of
reinstatement premiums on net premiums earned.
29
REINSURANCE OPERATIONS
The following table summarizes the underwriting results for this segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Net premiums earned .................. $ 802,265 $ 752,183 6.7%
Fee income and other ................. (5,024) (1,229) NM
Net losses and loss expenses ......... 1,041,322 456,498 128.1%
Acquisition costs .................... 218,271 185,285 17.8%
Operating expenses ................... 60,853 70,454 (13.6)%
Exchange losses ...................... 6,374 1,264 NM
--------- --------- -------
Underwriting (loss) profit ........... $(529,579) $ 37,453 NM
========= ========= =======
Underwriting results for the nine months ended September 30, 2001 have been
significantly affected by the effects of the September 11 event. Net premiums
earned in the first nine months of 2001 were reduced by approximately $85.0
million of net reinstatement premiums resulting from the September 11 event. The
effect of the reinstatement premiums was partially offset by additional premiums
earned in the first nine months of 2001, mainly due to an increase in premiums
written in the property lines and to increases in premium rates.
Exchange losses in the third quarter of 2001 related to exchange rate
movements of the U.S. dollar applied to net monetary assets denominated in
foreign currencies.
The following table presents the ratios for the reinsurance segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 129.8% 60.7%
Underwriting expense ratio ............ 34.8% 34.0%
----------- -----------
Combined ratio ........................ 164.6% 94.7%
=========== ===========
Net losses and loss expenses in the first nine months of 2001 included
$437.0 million related to the September 11 event, primarily on the property and
aviation reinsurance lines of business. The ratio also increased due to the
effects of the reinstatement premiums noted above. In addition, net losses and
loss expenses included losses incurred related to the Sri Lanka airport loss
event, Tropical Storm Allison, the Petrobras loss and the Seattle earthquake.
Net losses and loss expenses in the first nine months of 2000 only included the
Sydney hailstorms and Oklahoma tornadoes. The loss and loss expense ratio for
the nine months ended September 30, 2000 excluded $22.3 million related to an
intercompany stop loss arrangement with a subsidiary in the insurance segment.
There was no such arrangement in place for 2001. The loss and loss expense ratio
would have been 63.7% had this arrangement not been in place.
The underwriting expense ratio increased in the nine months ended September
30, 2001 compared to the same period in 2000 due to the effect of reinstatement
premiums on net premiums earned. However, this was partially offset by a
reduction in operating expenses related to certain accrued compensation expenses
of approximately $7.0 million.
30
FINANCIAL PRODUCTS AND SERVICES
The following table summarizes the underwriting profit for this segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Net premiums earned .................. $ 27,728 $ 18,466 50.2%
Fee income and other ................. 21,422 8,365 NM
Net losses and loss expenses ......... 8,093 4,705 NM
Acquisition costs .................... 2,456 1,822 34.8%
Operating expenses ................... 29,033 16,909 71.7%
--------- --------- -------
Underwriting profit .................. $ 9,568 $ 3,395 181.8%
--------- --------- -------
Unrealized losses on credit default
swaps .............................. $ 13,012 $ -- NM
========= ========= =======
Net premiums earned increased in the first nine months of 2001 compared to
the first nine months of 2000 principally due to the inclusion of a component of
fair value changes related to credit default swap premiums and financial
guaranty business written in 2001. See "Results of Operations for the Three
Months Ended September 30, 2001".
Fee income and other for the nine months ended September 30, 2001 included
trading gains and fair value adjustments related to the weather derivatives.
The following table presents the ratios for this segment:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
2001 2000
----------- -----------
Loss and loss expense ratio ........... 29.2% 25.5%
Underwriting expense ratio ............ 113.6% 101.4%
----------- -----------
Combined ratio ........................ 142.8% 126.9%
=========== ===========
The Company's financial guaranty operations write business with an expected
loss ratio of approximately 25%. The increase in the loss and loss expense ratio
represents the effect of the reclassification of the loss component of the
change in fair value on the credit default swaps. The growth in the expense
ratio reflects development of new business including the weather risk management
business.
INVESTMENT OPERATIONS
The following table illustrates the change in net investment income and net
realized (losses) gains for the nine-month periods ended September 30, 2001 and
2000:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
--------------------
2001 2000 % CHANGE
--------- --------- --------
Net investment income ......................... $ 412,969 $ 399,591 3.35%
Net realized (losses) gains on investment ..... $ (35,536) $ 74,808 NM
Net investment income increased in the first nine months of 2001 compared
to the first nine months of 2000 due primarily to a higher investment base in
2001. The investment base in 2001 included the receipt of net funds of $1.1
billion related to new debt issued by the Company during the second and third
quarters of 2001. The investment base for the first nine months of 2000 declined
as a result of claims payments, the repurchase of the Company's shares and the
reallocation of assets to other strategic investments. The increase in the
investment base in 2001 was partially offset by investment yields that declined
in the first nine months of 2001 compared to the
31
first nine months of 2000. It is anticipated that investment income will
decrease in the future as invested assets are drawn upon to meet claim
obligations with respect to the September 11 event.
Assets related to deposit liabilities are included in investments available
for sale. Interest earned on these assets is reduced by the investment expense
related to the accretion of deposit liabilities.
Net realized losses on investments arose in 2001 due to declining markets
in the first nine months of the year, and included a loss of $57.0 million
related to a write-down of certain of the Company's investments in circumstances
where the Company believed there was an other than temporary decline in the
value of those investments. Net realized gains on investments in the first nine
months of 2000 were realized primarily from the sale of equity securities as the
stock market reached record levels during that period.
OTHER REVENUES AND EXPENSES
The following table sets forth other revenues and expenses for the nine
months ended September 30, 2001 and 2000:
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
2001 2000 % CHANGE
--------- --------- --------
Equity in net income of affiliates ... $ 65,169 $ 61,682 5.7%
Amortization of intangible assets .... 44,216 41,409 6.8%
Corporate operating expenses ......... 65,321 44,771 45.9%
Interest expense ..................... 42,238 23,719 78.1%
Minority interest .................... 127 528 NM
Income tax benefit ................... (57,204) (11,266) NM
Equity in net income of affiliates included a loss of $27.0 million
attributable to the Company's share of the loss in Le Mans Re related to the
September 11 event in the first nine months of 2001. This was offset by higher
returns from the Company's investments in closed-end investment funds and the
management companies that administer these funds during the first nine months of
2001 compared to the first nine months of 2000.
Corporate operating expenses for the nine months ended September 30, 2001
included a one-time charge of $14.0 million related to Winterthur International
acquisition integration costs. Excluding this one-time charge, corporate
operating expenses for the first nine months of 2001 increased compared to the
first nine months of 2000 due to the increase in corporate infrastructure
necessary to support the expanding worldwide operations of the Company.
The increase in interest expense reflects the effect of $1.1 billion of new
debt raised by the Company in the second and third quarters of 2001. The
Company's financing structure is outlined in "--Financial Condition and
Liquidity."
The change in the Company's income taxes principally reflects the effects
of losses arising from the September 11 event.
FINANCIAL CONDITION AND LIQUIDITY
The Company's balance sheet has changed significantly since December 31,
2000. The assets and liabilities have increased for the effects of the September
11 event, as well as the purchase of Winterthur International. The September 11
event has resulted in an increase in loss reserves and reinsurance recoverables
of $1.85 billion and $1.1 billion, respectively, excluding Winterthur
International. The Company's exposure to the September 11 event from Winterthur
International is protected through a loss reserve seasoning mechanism after the
application of a deductible. As this deductible was included in the fair value
adjustment of loss reserves at June 30, 2001, both loss reserves and reinsurance
recoverables increased by $321.0 million. The purchase of Winterthur
International increased assets, including goodwill, by $4.3 billion and
liabilities by $4.0 billion at July 1, 2001.
32
As a holding company, the Company's assets consist primarily of its
investments in subsidiaries, and future cash flows depend on the availability of
dividends or other statutorily permissible payments from its subsidiaries. The
ability to pay such dividends is limited by the applicable laws and regulations
of Bermuda, the United States, Ireland, Switzerland and the United Kingdom,
including those of the Society of Lloyd's. No assurance can be given that the
Company or its subsidiaries will be permitted to pay dividends in the future.
The Company's shareholders' equity at September 30, 2001 was $4.8 billion of
which $2.4 billion was retained earnings.
At September 30, 2001, total investments available for sale and cash net of
unsettled investment trades were $11.4 billion compared to $9.1 billion at
December 31, 2000. This includes investments related to the Company's asset
accumulation business. The growth reflects investment assets of $1.4 billion
related to the acquisition of Winterthur International net of the preliminary
purchase price of $405.6 million. The balance was provided through positive
operational cash flows together with most of the proceeds from debt issued by
the Company during the second and third quarter of 2001 discussed below.
The Company's fixed income investments including short-term investments and
cash equivalents at September 30, 2001 represented approximately 90% of invested
assets and were managed by several outside investment management firms.
Approximately 90% of fixed income securities are investment grade, with 61%
rated Aa or AA or better by a nationally recognized rating agency. The average
quality of the fixed income portfolio was Aa3.
The net payable for investments purchased decreased from $1.4 billion at
December 31, 2000 to $1.2 billion as at September 30, 2001. This decrease
results from timing differences as investments are accounted for on a trade
date basis.
Operational cash flows during the first nine months of 2001 improved from
the same period of 2000 primarily due to a lower level of losses paid in 2001
and growth in premiums written. Cash flow has not yet been negatively affected
by the September 11 event as all losses are currently in reserves. The Company
has reviewed the anticipated cash flow from this event and believes it has
sufficient liquidity to meet its obligations. Certain business written by the
Company has loss experience generally characterized as having low frequency and
high severity. This may result in volatility in both the Company's results and
operational cash flows. For the nine months ended September 30, 2001 and 2000,
the net amount of losses due to claims activity paid by the Company was $1.1
billion and $1.3 billion, respectively.
During the nine months ended September 30, 2001, currency translation
adjustments were $3.2 million. This is shown as part of accumulated other
comprehensive income and primarily relates to unrealized losses on foreign
currency exchange rate movements in the nine months on the Company's investment
in Le Mans Re and certain subsidiaries where the functional currency is not the
U.S. dollar.
The Company establishes reserves to provide for estimated claims, the
general expenses of administering the claims adjustment process and for losses
incurred but not reported. These reserves are calculated using actuarial and
other reserving techniques to project the estimated ultimate net liability for
losses and loss expenses. The Company's reserving practices and the
establishment of any particular reserve reflect management's judgment concerning
sound financial practice and does not represent any admission of liability with
respect to any claims made against the Company. No assurance can be given that
actual claims made and payments related thereto will not be in excess of the
amounts reserved.
The establishment of reserves also includes reinsurance recoveries. Due to
the size of the gross losses stemming from the September 11 event and the
related reinsurance recoveries and the magnitude of the September 11 event on
the reinsurance industry, the Company, in addition to its normal review process,
further analyzed the recoverability of these assets. Approximately 96% of the
relevant reinsurers currently fall into Standard & Poor's financial strength
rating categories or equivalent of A or better, with approximately 65% rated AA
or better.
Insurance and reinsurance balances receivable and payable have increased
significantly since December 31, 2000. This was a direct result of the
Winterthur International acquisition which required the establishment of
estimates to comply with GAAP presentation.
33
The Company has had several share repurchase programs in the past as part
of its capital management strategy. On January 9, 2000, the Board of Directors
authorized a program for the repurchase of shares up to $500.0 million. The
repurchase of shares was announced in conjunction with a small dividend increase
of $0.04 per share per annum. Under this plan, the Company has purchased 6.6
million shares at an aggregate cost of $364.6 million or an average cost of
$52.21 per share. The Company has $135.4 million remaining in its share
repurchase authorization.
As at September 30, 2001, the Company had bank, letter of credit and loan
facilities available from a variety of sources including commercial banks
totaling $3.9 billion of which $1.6 billion in debt was outstanding. In
addition, $1.6 million of letters of credit were outstanding, 5% of which were
collateralized by the Company's investment portfolio, supporting U.S.
non-admitted business and the Company's Lloyd's capital requirements.
The financing structure as at September 30, 2001 was as follows:
IN USE /
FACILITY COMMITMENT OUTSTANDING
-------- ---------- -----------
DEBT:
364 day Revolver ................................. $ 500,000 $ --
2 facilities of 5 year Revolvers - total ......... 350,000 350,000
7.15% Notes due 2005 ............................. 100,000 100,000
6.58% Guaranteed Senior Notes due 2011 ........... 255,000 255,000
Zero Coupon Convertible Debentures due 2021 ...... 605,693 605,700
Liquid Yield Option(TM) Notes ("LYONs") due 2021 . 250,477 250,500
---------- ----------
$2,061,170 $1,561,200
========== ==========
LETTERS OF CREDIT:
5 facilities - total ............................. $1,817,000 $1,565,000
========== ==========
A syndicate of banks provides the $500.0 million 364-day revolving credit
facility and borrowings are unsecured. This facility was renewed along with the
$1.0 billion letter of credit facility effective September 29, 2001.
Two syndicates of banks provide the two five-year facilities and borrowings
are unsecured. Under these facilities, the amount of $350.0 million outstanding
at September 30, 2001 related primarily to the remaining outstanding balance
from the $300.0 million borrowed to finance the cash option election available
to shareholders in connection with the Mid Ocean acquisition in August 1998, and
to the $109.7 million borrowed to finance certain acquisitions in 1999.
The weighted average interest rate on funds borrowed during the nine months
ended September 30, 2001 was approximately 5.5%.
In 1995, NAC Re Corp, with which the Company merged in 1999, issued $100.0
million of 7.15% Senior Notes due November 15, 2005 through a public offering at
a price of $99.9 million.
In April 2001, the Company issued at par $255.0 million of 6.58% Guaranteed
Senior Notes due April 2011 through a private placement to institutional
investors. Proceeds of the debt were used for general corporate purposes.
In May 2001, the Company issued Zero Coupon Convertible Debentures due 2021
with a yield to maturity of 2.625%. The gross proceeds to the Company were
$600.0 million and related expenses were $13.5 million. Proceeds of the debt
were used for general corporate purposes.
34
In September 2001, the Company issued Liquid Yield Option(TM) Notes due
2021 with a yield to maturity of 2.875%. The gross proceeds to the Company were
$250.0 million and related expenses were $5.6 million. Proceeds of the debt were
used to repurchase $66.4 million of the Company's ordinary shares. The remainder
of the proceeds of the debt will be used for additional share repurchases, and
general corporate purposes which includes the settlement of claims related to
the September 11 event.
Total pre-tax interest expense on the borrowings described above was $42.2
million and $23.7 million for the nine months ended September 30, 2001 and 2000,
respectively. Associated with the Company's bank and loan commitments are
various loan covenants with which the Company was in compliance throughout both
nine-month periods.
CURRENT OUTLOOK
Prior to the September 11 event, the Company was experiencing some price
increases recognizing the competitive pressures on premium rates in the past.
The September 11 event has accelerated this process as capacity has been
constrained by an unprecedented loss event. Some of the capacity is expected to
be replaced by new capital entrants to the market but this is not expected to
replace all the capacity lost. The Company believes it has a strong global
franchise, underwriting expertise and financial resources to take advantage of
opportunities arising.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to potential loss from various market risks,
including changes in interest rates and foreign currency exchange rates. The
Company manages its market risks based on guidelines established by management.
The Company enters into derivatives and other financial instruments primarily
for risk management purposes. These derivative instruments are carried at fair
market value with the resulting gains and losses included in net realized gains
or losses on investments.
This risk management discussion and the estimated amounts generated from
the sensitivity analyses are forward-looking statements of market risk assuming
certain adverse market conditions occur. Actual results in the future may differ
materially from these projected results due to actual developments in the global
financial markets. The results of analysis used by the Company to assess and
mitigate risk should not be considered projections of future events of losses.
See generally "--Cautionary Note Regarding Forward-Looking Statements".
The Company's investment portfolio consists of fixed income and equity
securities, denominated in both U.S. and foreign currencies. Accordingly,
earnings will be affected by, among other things, changes in interest rates,
equity prices and foreign currency exchange rates.
FOREIGN CURRENCY RISK MANAGEMENT
The Company uses foreign exchange contracts to manage its exposure to the
effects of fluctuating foreign currencies on the value of its foreign currency
fixed maturities and equity investments. These contracts are not designated as
hedges for financial reporting purposes and therefore, realized and unrealized
gains and losses on these contracts are recorded in income in the period in
which they occur. These contracts generally have maturities of three months or
less. In addition, where the Company's investment managers believe potential
gains exist in a particular currency, a forward contract may not be entered
into. At September 30, 2001, forward foreign exchange contracts with notional
principal amounts totaling $127.2 million were outstanding. The fair value of
these contracts as at September 30, 2001 was $124.9 million with unrealized
losses of $2.3 million. Gains of $4.0 million were realized during the nine
months ended September 30, 2001. Based on this value, a 10% appreciation or
depreciation of the U.S. dollar as compared to the level of other currencies
under contract at September 30, 2001 would have resulted in approximately $10.6
million of unrealized losses and $0.5 million in unrealized gains, respectively.
In addition, the Company also enters into foreign exchange contracts to buy
and sell foreign currencies in the course of trading its foreign currency
investments. These contracts are not designated as hedges, and generally
35
have maturities of two weeks or less. As such, any realized or unrealized gains
or losses are recorded in income in the period in which they occur. At September
30, 2001, the value of such contracts was insignificant.
The Company also uses foreign exchange forward contracts to reduce its
exposure to premiums receivable denominated in foreign currencies. The forward
contract is closely matched with the receivable maturity date. Both the foreign
currency receivable and the offsetting forward contract are marked to market on
each balance sheet date, with any gains and losses recognized in the income
statement. As at September 30, 2001, the Company had forward contracts
outstanding for the sale of $10.5 million of foreign currencies at fixed rates,
primarily U.K. Sterling and Euros. Activity was insignificant in the nine months
ended September 30, 2001.
The Company attempts to manage the exchange volatility arising on certain
administration costs denominated in foreign currencies. Throughout the year,
forward contracts are entered into to acquire the foreign currency at an agreed
rate in the future. At September 30, 2001, the Company had forward contracts
outstanding for the purchase of $3.0 million of Euros and U.K. Sterling at fixed
rates. Activity was insignificant in the nine months ended Septmber 30, 2001.
FINANCIAL MARKET EXPOSURE
The Company also uses derivative investments to add value to the portfolio
where market inefficiencies are believed to exist, to equitize cash holdings of
equity managers and to adjust the duration of a portfolio of fixed income
securities to match the duration of related deposit liabilities. The Company
measures potential losses in fair values using various statistical techniques,
including Value at Risk ("VaR"). VaR is a comprehensive statistical measure that
uses historical rates, market movements, credit spreads and default rates to
estimate the volatility and correlation of these factors to calculate the
maximum loss that could occur over a defined period of time given a certain
probability. The Company calculates VaR based on a 95% confidence interval with
a one month horizon.
At September 30, 2001, bond and stock index futures outstanding were $824.3
million with underlying investments having a market value of $3.4 billion. A 10%
appreciation or depreciation of these derivative instruments would have resulted
in unrealized gains and unrealized losses of $82.4 million, respectively. The
Company reduces its exposure to these futures through offsetting transactions,
including options and forwards. The VaR of the total investment portfolio and of
all derivatives at September 30, 2001 was approximately $251.0 and $13.0
million, respectively.
The Company also trades in weather derivatives. These products are recorded
at fair value, and fair value adjustments are recognized in earnings in each
period as a part of fee income and other. These types of transactions may expose
the Company to financial market risk through changes in interest rates, credit
spreads and other market factors. For the nine months ended September 30, 2001,
fee income and other included $10.2 million related to weather derivatives.
ACCOUNTING PRONOUNCEMENTS
See Note 3 to the Consolidated Financial Statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides a
"safe harbor" for forward-looking statements. This Form 10-Q, the Company's
Annual Report to Shareholders, any proxy statement, any other Form 10-Q, Form
10-K or Form 8-K of the Company or any other written or oral statements made by
or on behalf of the Company may include forward-looking statements which reflect
the Company's current views with respect to future events and financial
performance. Such statements include forward-looking statements both with
respect to the Company in general, and the insurance, reinsurance and financial
products and services sectors in particular (both as to underwriting and
investment matters). Statements which include the words "expect", "intend",
"plan", "believe", "estimate", "project", "anticipate", "will", and similar
statements of a future or forward-looking nature identify forward-looking
statements for purposes of the PSLRA or otherwise.
36
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause actual results to differ materially from those indicated in such
statements. The Company believes that these factors include, but are not limited
to, the following: (i) the size of the Company's claims from the September 11
event and other loss events may change due to the preliminary nature of reports
and estimates of loss and damage; (ii) the timely and full recoverability of
reinsurance placed by the Company with third parties; (iii) the projected amount
of ceded reinsurance recoverables and the ratings and creditworthiness of
reinsurers may change; (iv) the timing of claims payments being faster or the
receipt of reinsurance recoverables being slower than anticipated by the
Company; (v) ineffectiveness or obsolescence of the Company's business strategy
due to changes in current or future market conditions; (vi) increased
competition on the basis of pricing, capacity, coverage terms or other factors;
(vii) greater frequency or severity of claims and loss activity, including as a
result of natural or man-made catastrophic events, than the Company's
underwriting, reserving or investment practices anticipate based on historical
experience or industry data; (viii) developments in the world's financial and
capital markets which adversely affect the performance of the Company's
investments and our access to such markets; (ix) availability of borrowings and
letters of credit under the Company's credit facilities; (x) changes in
regulation or tax laws applicable to the Company, its subsidiaries, brokers or
customers; (xi) acceptance of the Company's products and services, including new
products and services; (xii) changes in the availability, cost or quality of
reinsurance; (xiii) changes in the distribution or placement of risks due to
increased consolidation of insurance and reinsurance brokers; (xiv) loss of key
personnel; (xv) the effects of mergers, acquisitions and divestitures,
including, without limitation, the Winterthur International acquisition; (xvi)
changes in rating agency policies or practices; (xvii) changes in accounting
policies or practices; (xviii) changes in general economic conditions, including
inflation, foreign currency exchange rates and other factors; and (xix) the
effects of business disruption or economic contraction due to terrorism or other
hostilities. The foregoing review of important factors should not be construed
as exhaustive and should be read in conjunction with the other cautionary
statements that are included herein or elsewhere. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future developments or otherwise.
37
XL CAPITAL LTD
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings, including
arbitrations, arising in the ordinary course of business. Such legal proceedings
generally relate to claims asserted by or against the Company's subsidiaries in
the ordinary course of their respective insurance, reinsurance and financial
products and services operations. The Company does not believe that the eventual
resolution of any of the legal proceedings to which it is a party will result in
a material adverse effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
4.49 Indenture dated September 4, 2001 between XL Capital Ltd and State Street
Bank & Trust Company relating to the Liquid-Yield Option Notes due 2021.
4.50 Form of Liquid-Yield Option Note (included in exhibit 4.49 above and
incorporated by reference herein).
4.51 Registration Rights Agreement dated September 4, 2001 between XL Capital
Ltd and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
10.44 Amendment No. 1 dated as of September 26, 2001 to the Amended and
Restated Credit Agreement dated as of August 31, 2001 between XL Capital Ltd, XL
Insurance Ltd, XL Re Ltd and Mid Ocean Limited, as borrowers and guarantors, the
banks party thereto and The Chase Manhattan Bank, as administrative agent.
10.45 Amendment No. 1 dated as of September 26, 2001 to the 364-day Credit
Agreement dated as of June 28, 2001 between XL Capital Ltd, X.L. America, Inc.,
XL Insurance Ltd, XL Europe Ltd and XL Re Ltd, as borrowers and guarantors and
the lenders party thereto and The Chase Manhattan Bank, as administrative agent.
10.46 Seventh Amendment dated as of September 26, 2001 to the Revolving Credit
Agreement dated as of June 6, 1997, as amended, by and among XL Capital Ltd, XL
Insurance Ltd, XL Re Ltd and EXEL Acquisition Ltd., as guarantors, and except in
the case of EXEL Acquisition Ltd., as borrowers and Mellon Bank, N.A., as agent
and the banks party thereto.
10.47 Sixth Amendment dated as of August 27, 2001 to the Revolving Credit
Agreement dated as of June 6, 1997, as amended, by and among XL Capital Ltd, XL
Insurance Ltd, XL Re Ltd and EXEL Acquisition Ltd., as guarantors, and except in
the case of EXEL Acquisition Ltd., as borrowers and Mellon Bank, N.A., as agent
and the banks party thereto.
10.48 Amendment No. 1 dated as of September 26, 2001 to the Letter of Credit
and Reimbursement Agreement dated as of June 29, 2001 between XL Capital Ltd,
X.L. America, Inc., XL Insurance Ltd, XL Europe Ltd and XL Re Ltd, each an
account party and guarantor, the lenders party thereto and The Chase Manhattan
Bank, as administrative agent.
10.49 Amendment No. 1 dated as of September 26, 2001 to the Letter of Credit
and Reimbursement Agreement dated November 3, 2000 between XL Capital Ltd as
account party and guarantor and, X.L. America, Inc., XL Insurance Ltd, XL Europe
Ltd and XL Re Ltd, as guarantors and the lenders party thereto and Citibank
International plc, as agent and trustee for the lenders and Salomon Brothers
International Limited, as arranger.
38
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K filed on July 27, 2001, under Item 5 thereof.
Current Report on Form 8-K filed on August 9, 2001, under Items 2 and 7 thereof.
Current Report on Form 8-K filed on September 5, 2001, under Item 5 thereof.
Current Report on Form 8-K filed on September 11, 2001, under Item 5 thereof.
Current Report on Form 8-K filed on September 17, 2001, under Item 5 thereof.
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
XL CAPITAL LTD
-------------------------------------------------------
(Registrant)
October 29, 2001 /s/ BRIAN M. O'HARA
-------------------------------------------------------
Brian M. O'Hara
President and Chief Executive Officer
October 29, 2001 /s/ JERRY DE ST. PAER
-------------------------------------------------------
Jerry de St. Paer
Executive Vice President and Chief Financial Officer
40
EX-4.49
3
c22070_ex4-49.txt
INDENTURE XL CAPITAL & STATE ST. BANK
Exhibit 4.49
XL Capital Ltd
Liquid Yield Option(TM) Notes due 2021 (Zero Coupon---Senior)
----------------------------------------------------------
INDENTURE
Dated as of September 7, 2001
----------------------------------------------------------
State Street Bank and Trust Company
TRUSTEE
----------------------------------------------------------
(TM)Trademark of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions...............................................................1
Section 1.2 Other Definitions.........................................................5
Section 1.3 Incorporation by Reference of Trust Indenture Act.........................6
Section 1.4 Rules of Construction.....................................................7
Section 1.5 Acts of Holders...........................................................7
ARTICLE II THE SECURITIES
Section 2.1 Form and Dating...........................................................8
Section 2.2 Execution and Authentication.............................................10
Section 2.3 Registrar, Paying Agent, Bid Solicitation Agent and Conversion Agent.....11
Section 2.4 Paying Agent to Hold Money and Securities in Trust.......................11
Section 2.5 Securityholder Lists.....................................................11
Section 2.6 Transfer and Exchange....................................................12
Section 2.7 Replacement Securities...................................................13
Section 2.8 Outstanding Securities; Determinations of Holders' Action................14
Section 2.9 Temporary Securities.....................................................14
Section 2.10 Cancellation.............................................................15
Section 2.11 Persons Deemed Owners....................................................15
Section 2.12 Global Securities........................................................15
Section 2.13 CUSIP Numbers............................................................20
Section 2.14 Original Issue Discount..................................................20
ARTICLE III CONTINGENT CASH INTEREST
Section 3.1 Contingent Cash Interest.................................................21
Section 3.2 Payment of Contingent Cash Interest......................................21
Section 3.3 Notice...................................................................23
ARTICLE IV CONTINGENT ADDITIONAL PRINCIPAL
Section 4.1 Contingent Additional Principal..........................................23
Section 4.2 Payment of Contingent Additional Principal...............................24
Section 4.3 Notice...................................................................24
ARTICLE V REDEMPTION AND PURCHASES
Section 5.1 Company's Right to Redeem; Notices to Trustee............................25
Section 5.2 Selection of Securities to Be Redeemed...................................25
Section 5.3 Notice of Redemption.....................................................25
Section 5.4 Effect of Notice of Redemption...........................................26
Section 5.5 Deposit of Redemption Price..............................................26
i
Section 5.6 Securities Redeemed in Part..............................................26
Section 5.7 Repurchase of Securities by the Company at Option of the Holder..........27
Section 5.8 Purchase of Securities at Option of the Holder upon a Change in Control..33
Section 5.9 Effect of Purchase Notice or Change in Control Purchase Notice...........39
Section 5.10 Deposit of Purchase Price or Change in Control Purchase Price............40
Section 5.11 Securities Purchased in Part.............................................40
Section 5.12 Covenant to Comply With Securities Laws Upon Purchase of Securities......40
Section 5.13 Repayment to the Company.................................................41
.
ARTICLE VI COVENANTS
Section 6.1 Payment of Securities....................................................41
Section 6.2 SEC and Other Reports....................................................41
Section 6.3 Compliance Certificate...................................................42
Section 6.4 Further Instruments and Acts.............................................42
Section 6.5 Maintenance of Office or Agency..........................................42
Section 6.6 Delivery of Certain Information..........................................43
Section 6.7 Additional Amounts.......................................................43
ARTICLE VII SUCCESSOR CORPORATION
Section 7.1 When Company May Merge or Transfer Assets................................44
ARTICLE VIII DEFAULTS AND REMEDIES
Section 8.1 Events of Default........................................................45
Section 8.2 Acceleration.............................................................46
Section 8.3 Other Remedies...........................................................47
Section 8.4 Waiver of Past Defaults..................................................47
Section 8.5 Control by Majority......................................................47
Section 8.6 Limitation on Suits......................................................47
Section 8.7 Rights of Holders to Receive Payment.....................................48
Section 8.8 Collection Suit by Trustee...............................................48
Section 8.9 Trustee May File Proofs of Claim.........................................48
Section 8.10 Priorities...............................................................49
Section 8.11 Undertaking for Costs....................................................49
Section 8.12 Waiver of Stay, Extension or Usury Laws..................................49
ARTICLE IX TRUSTEE
Section 9.1 Duties of Trustee........................................................50
Section 9.2 Rights of Trustee........................................................51
Section 9.3 Individual Rights of Trustee.............................................52
Section 9.4 Trustee's Disclaimer.....................................................52
Section 9.5 Notice of Defaults.......................................................53
Section 9.6 Reports by Trustee to Holders............................................53
Section 9.7 Compensation and Indemnity...............................................53
Section 9.8 Replacement of Trustee...................................................54
Section 9.9 Successor Trustee by Merger..............................................54
ii
Section 9.10 Eligibility; Disqualification...........................................55
Section 9.11 Preferential Collection of Claims Against Company.......................55
ARTICLE X DISCHARGE OF INDENTURE
Section 10.1 Discharge of Liability on Securities....................................55
Section 10.2 Repayment to the Company................................................55
ARTICLE XI AMENDMENTS
Section 11.1 Without Consent of Holders..............................................55
Section 11.2 With Consent of Holders.................................................56
Section 11.3 Compliance with Trust Indenture Act.....................................57
Section 11.4 Revocation and Effect of Consents, Waivers and Actions..................57
Section 11.5 Notation on or Exchange of Securities...................................57
Section 11.6 Trustee to Sign Supplemental Indentures.................................57
Section 11.7 Effect of Supplemental Indentures.......................................58
ARTICLE XII CONVERSIONS
Section 12.1 Conversion Privilege....................................................58
Section 12.2 Conversion Procedure....................................................59
Section 12.3 Fractional Shares.......................................................59
Section 12.4 Taxes on Conversion.....................................................59
Section 12.5 Company to Provide Stock................................................60
Section 12.6 Adjustment for Change in Capital Stock..................................60
Section 12.7 Adjustment for Rights Issue.............................................61
Section 12.8 Adjustment for Other Distributions......................................62
Section 12.9 Adjustment for Company Tender Offer.....................................63
Section 12.10 When Adjustment May Be Deferred.........................................64
Section 12.11 When No Adjustment Required.............................................64
Section 12.12 Notice of Adjustment....................................................65
Section 12.13 Voluntary Increase......................................................65
Section 12.14 Notice of Certain Transactions..........................................65
Section 12.15 Reorganization of Company; Special Distributions........................66
Section 12.16 Company Determination Final.............................................66
Section 12.17 Trustee's Adjustment Disclaimer.........................................66
Section 12.18 Simultaneous Adjustments................................................67
Section 12.19 Successive Adjustments..................................................67
ARTICLE XIII MISCELLANEOUS
Section 13.1 Trust Indenture Act Controls............................................67
Section 13.2 Notices.................................................................67
Section 13.3 Communication by Holders with Other Holders.............................68
Section 13.4 Certificate and Opinion as to Conditions Precedent......................68
Section 13.5 Statements Required in Certificate or Opinion...........................68
Section 13.6 Separability Clause.....................................................69
Section 13.7 Rules by Trustee, Paying Agent, Conversion Agent and Registrar..........69
iii
Section 13.8 Legal Holidays..........................................................69
Section 13.9 GOVERNING LAW...........................................................69
Section 13.10 No Recourse Against Others..............................................69
Section 13.11 Successors..............................................................69
Section 13.12 Multiple Originals......................................................69
EXHIBIT A Form of Global Security
EXHIBIT B Transfer Certificate
iv
INDENTURE dated as of September 7, 2001 between XL CAPITAL
LTD, a Cayman Islands exempted limited company (the "Company"), and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts trust company ("Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
Liquid Yield Option(TM) Notes due 2021:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 DEFINITIONS
"Accreted Conversion Price" of a Security as of any date
means the Accreted Value of such Security divided by the number of Ordinary
Shares issuable upon conversion of the Security on that date.
"Accreted Value" as of any date means the sum of the Issue
Price, plus the accrued Original Issue Discount and any accrued Contingent
Additional Principal, if any, to the date of determination (excluding any
Contingent Cash Interest that becomes payable).
"Additional Amount" means any amounts that are required under
this Indenture to be paid to the Holders by the Company as described in Section
6.7.
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct or cause the direction of the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or any beneficial interest therein, the
rules and procedures of the Depositary for such Security, in each case to the
extent applicable to such transfer or transaction and as in effect from time to
time.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of such board.
"Business Day" means, with respect to any Security, a day that
in the City of New York or the City of Boston, Massachusetts, is not a day on
which banking institutions are authorized by law or regulation to close.
"Capital Stock" for any entity means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that
corporation.
2
"Certificated Securities" means securities that are in
registered definitive form.
"Company" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"Company Order" means a written request or order signed in the
name of the Company by any two Officers.
"Corporate Trust Office" means the corporate trust office of
the Trustee at which at any time the trust created by this Indenture shall be
administered, which office at the date hereof is located at 225 Asylum Street,
23rd Floor, Hartford, Connecticut 06103, Attention: Corporate Trust
Administration (XL Capital Ltd Liquid Yield Option(TM) Notes due 2021), or such
other address as the Trustee may designate from time to time by notice to the
Holders and the Company, or the corporate trust office of any successor Trustee
at which such trust shall be administered (or such other address as a successor
Trustee may designate from time to time by notice to the Holders and the
Company).
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect and, to the extent optional, adopted by
the Company, on the date of this Indenture, consistently applied.
"GICs" means guaranteed investment contracts.
"Global Security" means a permanent Global Security that is in
the form of the Security attached hereto as Exhibit A, and that is deposited
with and registered in the name of the Depositary.
"Holder" or "Securityholder" means a person in whose name a
Security is registered on the Registrar's books.
"Indebtedness" means, without duplication, the principal or
face amount of (i) all obligations for borrowed money, (ii) all obligations
evidenced by debentures, notes or other similar instruments, (iii) all
obligations in respect of letters of credit or bankers acceptances or similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations to pay the deferred purchase price of property or services, except
trade accounts payable arising in the ordinary course of business, (v) all
obligations as lessee which are capitalized in accordance with generally
accepted accounting principles, and (vi) all Indebtedness of others guaranteed
by the Company or for which the Company is legally responsible or liable
(whether by agreement to purchase indebtedness of, or to supply funds or to
invest in, others) (it being understood, for the avoidance of doubt, that
insurance payment liabilities, as such, and liabilities arising in the ordinary
course of such Company's business as an insurance or reinsurance company
(including GICs) or corporate member of The Council of Lloyds or as a provider
of financial or investment
3
services or contracts (in each case other than in connection with the provision
of financing to the Company or any Affiliate of the Company) shall not be
deemed to constitute Indebtedness).
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof, including the provisions
of the TIA that are deemed to be a part hereof.
"Issue Date" of any Security means the date on which the
Security was originally issued or deemed issued as set forth on the face of the
Security.
"Liquidated Damages" means liquidated damages pursuant to the
Registration Rights Agreement.
"NYSE" means The New York Stock Exchange.
"Officer" means the Chairman of the Board, the Vice Chairman,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Executive Vice President, any Senior Vice President, any Vice President, the
Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of
the Company.
"Officers' Certificate" means a written certificate containing
the information specified in Sections 13.4 and 13.5, signed in the name of the
Company by any two Officers, and delivered to the Trustee. An Officers'
Certificate given pursuant to Section 6.3 shall be signed by a financial or
accounting Officer of the Company but need not contain the information specified
in Sections 13.4 and 13.5.
"Opinion of Counsel" means a written opinion containing the
information specified in Sections 13.4 and 13.5, from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of, or counsel to, the
Company or the Trustee.
"Original Issue Discount" of any Security means the difference
between the issue price and the principal amount at maturity of the Security as
set forth on the face of the Security, which shall accrue as set forth in the
form of Security.
"Ordinary Shares" shall mean the Class A ordinary shares,
$0.01 par value per share, of the Company existing on the date of this Indenture
or any other shares of Capital Stock of the Company into which such Class A
ordinary shares shall be reclassified or changed.
"Non-U.S. Person" means any person who, for United States
federal income tax purposes, is not (i) a corporation or partnership created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia or, in the case of a partnership, otherwise treated as a
U.S. person under applicable U.S. Treasury Regulations, (ii) a citizen or
resident of the United States, (iii) an estate the income of which is subject to
United States federal income tax without regard to its source or (iv) a trust,
if a court within the United States is able to exercise primary supervision over
administration of the trust and one or more United States persons have authority
to control all substantial decisions of the trust.
4
"person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Redemption Date" or "redemption date" shall mean the date
specified in a notice of redemption on which the Securities may be redeemed in
accordance with the terms of the Securities and this Indenture.
"Regular Cash Dividends" means quarterly or other periodic
cash dividends on Ordinary Shares as declared by the Board of Directors as part
of cash dividends practices and that are not designated by the Board of
Directors as extraordinary or special or other nonrecurring dividends.
"Registration Rights Agreement" means the registration rights
agreement, relating to the Securities and the Ordinary Shares issuable upon
conversion of the Securities, dated as of September 7, 2001, between the Company
and Merrill Lynch & Co., Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Relevant Date" means, in respect of any payment, the date on
which such payment first becomes due and payable, but if the full amount of the
moneys payable has not been received by the Trustee on or prior to such due
date, it means the first date on which, the full amount of such moneys having
been so received and being available for payment to holders, notice to that
effect shall have been duly given to the holders of the Securities.
"Responsible Officer" shall mean, when used with respect to
the Trustee, any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Restricted Security" means a Security required to bear the
restrictive legend set forth in the form of Security set forth in Exhibit A of
this Indenture.
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Company's Liquid Yield Option(TM)
Notes due 2021, issued under this Indenture.
"Securityholder" or "Holder" means a person in whose name a
Security is registered on the Registrar's books.
"Stated Maturity", when used with respect to any Security,
means September 7, 2021.
5
"Subsidiary" means any person of which at least a majority of
the outstanding Voting Stock shall at the time directly or indirectly be owned
or controlled by the Company or by one or more Subsidiaries or by the Company
and one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 as in effect on
the date of this Indenture, provided, however, that in the event the TIA is
amended after such date, TIA means, to the extent required by any such
amendment, the TIA as so amended.
"Trading Day" means a day during which trading in securities
generally occurs on the NYSE or, if the Ordinary Shares are not listed on the
NYSE, on the principal other national or regional securities exchange on which
the Ordinary Shares then are listed or, if the Ordinary Shares are not listed on
a national or regional securities exchange, on the National Association of
Securities Dealers Automated Quotation System or, if the Ordinary Shares are not
quoted on the National Association of Securities Dealers Automated Quotation
System, on the principal other market on which the Ordinary Shares are then
traded.
"Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"Voting Stock" of a person means Capital Stock of such person
of the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such person (irrespective of whether
or not at the time Capital Stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
Section 1.2 OTHER DEFINITIONS.
Term Section: Defined in:
"Accreted Value Conversion"................................... Exhibit A
"Act"......................................................... 1.5
"Associate"................................................... 5.8
"Agent Members"............................................... 2.12(e)
"Average Sale Price".......................................... 12.1
"beneficial owner"............................................ 5.8(a)
"Bid Solicitation Agent"...................................... 2.3
"cash"........................................................ 5.7(b)
"Change in Control"........................................... 5.8(a)
"Change in Control Notice Date"............................... 5.8(b)
"Change in Control Purchase Date"............................. 5.8(a)
"Change in Control Purchase Notice"........................... 5.8(c)
"Change in Control Purchase Price"............................ 5.8(a)
"Company Notice".............................................. 5.7(e)
"Company Notice Date"......................................... 5.7(c)
"Contingent Additional Principal"............................. 4.1
6
"Contingent Cash Interest".................................... 3.1
"Contingent Cash Interest Payment Date"....................... 3.1
"Contingent Cash Interest Record Date"........................ 3.1
"Conversion Agent"............................................ 2.3
"Conversion Date"............................................. 12.2
"Conversion Period"........................................... Exhibit A
"Conversion Rate"............................................. 12.1
"Depositary".................................................. 2.1(a)
"DTC"......................................................... 2.1(a)
"Defaulted Interest".......................................... 3.2
"Event of Default"............................................ 8.1
"Exchange Act"................................................ 5.7(d)
"Ex-Dividend Time"............................................ 12.1
"Expiration Time"............................................. 12.9
"Extraordinary Cash Dividend"................................. 12.8
"Five-Trading-Day Measurement Period"......................... 3.2
"Interest Payment Date"....................................... Exhibit A
"Issue Price"................................................. Exhibit A
"Legal Holiday"............................................... 13.8
"Legend"...................................................... 2.6(f)
"Market Price"................................................ 5.7(d)
"Notice of Default"........................................... 8.1
"Ordinary Shares Threshold Price"............................. 4.1
"Ordinary Shares Record Date"................................. 3.2
"Parity Value"................................................ Exhibit A
"Paying Agent"................................................ 2.3
"Purchase Date"............................................... 5.7(a)
"Purchase Notice"............................................. 5.7(a)
"Purchase Price".............................................. 5.7(a)
"Purchased Shares"............................................ 12.9
"QIB"......................................................... 2.1(a)
"Redemption Price"............................................ Exhibit A
"Registrar"................................................... 2.3
"Rule 144A Information"....................................... 6.6
"Sale Price".................................................. 5.7(d)
"Semiannual Period"........................................... 3.1
"Securities' Market Price".................................... 3.2
"Securities Act".............................................. 5.7(d)
"Special Record Date"......................................... 3.2
"Spin-off".................................................... 12.8
"Time of Determination"....................................... 12.1
"Trading Price"............................................... Exhibit A
"Thirty-Trading-Day Measurement Period"....................... 3.2
Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made
7
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
Section 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it and shall be construed in accordance with "U.S. GAAP";
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural, and words in the plural
include the singular;
(6) all references to $, dollars, cash payments or money refer to United
States currency; and
(7) all references to "interest" on any Security in this Indenture shall
mean accretion of Original Issue Discount to the principal amount
of such Security unless such reference is to "Contingent Cash
Interest."
Section 1.5 ACTS OF HOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of Holders signing such instrument
8
or instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such officer the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's authority. The fact and date of the
execution of any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be proved by the
register for the Securities.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee, the
Company or the Conversion Agent in reliance thereon, whether or not notation of
such action is made upon such Security.
(e) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in advance
a record date for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Securities shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.
ARTICLE II
THE SECURITIES
Section 2.1 FORM AND DATING. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is a part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage (provided that any
such notation, legend or
9
endorsement required by usage is in a form acceptable to the Company). The
Company shall provide any such notations, legends or endorsements to the Trustee
in writing. Each Security shall be dated the date of its authentication.
(a) GLOBAL SECURITIES. Securities offered and sold within the
United States to qualified institutional buyers as defined in Rule 144A ("QIBs")
in reliance on Rule 144A shall be issued initially in the form of a Global
Security, which shall be deposited with the Trustee at its Corporate Trust
Office, as custodian for the Depositary (as defined below) and registered in the
name of The Depository Trust Company ("DTC") or the nominee thereof (DTC, or any
successor thereto, and any such nominee being hereinafter referred to as the
"Depositary"), duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary as hereinafter provided.
(b) GLOBAL SECURITIES IN GENERAL. Each Global Security shall
represent such of the outstanding Securities as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount at
maturity of outstanding Securities from time to time endorsed thereon and that
the aggregate principal amount at maturity of outstanding Securities represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges, redemptions, purchases and conversions.
Any adjustment of the aggregate principal amount of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.12 hereof and shall be made on the records of the Trustee and the Depositary.
(c) BOOK-ENTRY PROVISIONS. This Section 2.1(c) shall apply
only to Global Securities deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(c), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary, (b) shall
be delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions and (c) shall bear legends substantially to the following effect:
"THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON THE CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HERBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF XL CAPITAL LTD
THAT THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR
10
OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 OR ANOTHER AVAILABLE EXEMPTION THEREUNDER (IF AVAILABLE) OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS.
THIS SECURITY, ANY ORDINARY SHARES ISSUABLE UPON ITS CONVERSION AND ANY
RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY
THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH
SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION OR INTERPRETATION
THEREOF OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED
SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE
DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT."
Section 2.2 EXECUTION AND AUTHENTICATION. The Securities shall
be executed on behalf of the Company by any Officer. The signature of the
Officer on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at the time of the execution of the Securities Officers of
the Company shall bind the Company, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of
authentication of such Securities.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver the Securities for
original issue in an initial aggregate principal amount at maturity (subject to
adjustment) of up to $508,842,000 upon one or more Company Orders without any
further action by the Company. The aggregate principal amount of the Securities
due at the Stated Maturity thereof outstanding at any time may not exceed the
amount set forth in the foregoing sentence, except as provided in Article IV.
The Securities shall originally be issued only in registered
form without coupons and only in denominations of $1,000 of principal amount at
maturity and any integral multiple thereof.
11
Section 2.3 REGISTRAR, PAYING AGENT, BID SOLICITATION AGENT
AND CONVERSION AGENT. The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar"), an office or agency where Securities may be presented for
purchase or payment ("Paying Agent") and an office or agency where Securities
may be presented for conversion ("Conversion Agent"). The Company shall also
appoint a bid solicitation agent (the "Bid Solicitation Agent") to act pursuant
to paragraph 2(d) of the Securities. The Registrar shall keep a register of the
Securities and of their transfer, exchange and conversion. The Company may have
one or more co-registrars, one or more additional paying agents and one or more
additional conversion agents. The term Paying Agent includes any additional
paying agent, including any named pursuant to Section 6.5. The term Conversion
Agent includes any additional conversion agent, including any named pursuant to
Section 6.5.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent, Conversion Agent or co-registrar (other than
the Trustee). The agreement shall implement the provisions of this Indenture
that relate to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 9.7. The Company or any
Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar,
Conversion Agent or co-registrar.
The Company initially appoints the Trustee as Registrar,
Conversion Agent, Paying Agent and Bid Solicitation Agent in connection with the
Securities.
Section 2.4 PAYING AGENT TO HOLD MONEY AND SECURITIES IN
TRUST. Except as otherwise provided herein, on or prior to each due date of
payments in respect of any Security, the Company shall deposit with the Paying
Agent a sum of money (in immediately available funds if deposited on the due
date) or Ordinary Shares or, as permitted by this Indenture, a combination
thereof, sufficient to make such payments when so becoming due. The Company
shall require each Paying Agent (other than the Trustee) to agree in writing
that the Paying Agent shall hold in trust for the benefit of Securityholders or
the Trustee all money and Ordinary Shares held by the Paying Agent for the
making of payments in respect of the Securities and shall notify the Trustee of
any default by the Company in making any such payment. At any time during the
continuance of any such default, the Paying Agent shall, upon the written
request of the Trustee, forthwith pay to the Trustee all money and Ordinary
Shares so held in trust. If the Company or a Subsidiary or an Affiliate of any
of them acts as Paying Agent, it shall segregate the money and Ordinary Shares
held by it as Paying Agent and hold it as a separate trust fund. The Company at
any time may require a Paying Agent to pay all money and Ordinary Shares held by
it to the Trustee and to account for any funds and Ordinary Shares disbursed by
it. Upon doing so, the Paying Agent shall have no further liability for the
money or the Ordinary Shares.
Section 2.5 SECURITYHOLDER LISTS. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on May 1 and November 1 a listing of Securityholders dated within
15 days of the date on which the list is furnished and at such other times as
the Trustee
12
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Securityholders.
Section 2.6 TRANSFER AND EXCHANGE. (a) Subject to Section 2.12
hereof, (a) upon surrender for registration of transfer of any Security,
together with a written instrument of transfer satisfactory to the Registrar
duly executed by the Securityholder or such Securityholder's attorney duly
authorized in writing, at the office or agency of the Company designated as
Registrar or co-registrar pursuant to Section 2.3, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denomination or denominations, of a like aggregate principal amount at maturity.
The Company shall not charge a service charge for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges that may be imposed in
connection with the transfer or exchange of the Securities from the
Securityholder requesting such transfer or exchange.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination or denominations, of a like
aggregate principal amount at maturity, upon surrender of the Securities to be
exchanged, together with a written instrument of transfer satisfactory to the
Registrar duly executed by the Securityholder or such Securityholder's attorney
duly authorized in writing, at such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
The Company shall not be required to make, and the Registrar
need not register, transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or any Securities in respect of which a Purchase Notice or
Change in Control Purchase Notice has been given and not withdrawn by the Holder
thereof in accordance with the terms of this Indenture (except, in the case of
Securities to be purchased in part, the portion thereof not to be purchased) or
any Securities for a period of 15 days before the mailing of a notice of
redemption of Securities to be redeemed.
(b) Notwithstanding any provision to the contrary herein, so
long as a Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, shall be made
only in accordance with Section 2.12 and this Section 2.6(b). Transfers of a
Global Security shall be limited to transfers of such Global Security, to the
Depositary, to nominees of the Depositary or to a successor of the Depositary or
such successor's nominee.
(c) Successive registrations and registrations of transfers
and exchanges as aforesaid may be made from time to time as desired, and each
such registration shall be noted on the register for the Securities.
(d) Any Registrar appointed pursuant to Section 2.3 hereof
shall provide to the Trustee such information as the Trustee may reasonably
require in connection with the delivery by such Registrar of Securities upon
transfer or exchange of Securities.
13
(e) No Registrar shall be required to make registrations of
transfer or exchange of Securities during any periods designated in the text of
the Securities or in this Indenture as periods during which such registration of
transfers and exchanges need not be made.
(f) If Securities are issued upon the transfer, exchange or
replacement of Securities subject to restrictions on transfer and bearing the
legends set forth on the form of Security attached hereto as Exhibit A setting
forth such restrictions (collectively, the "Legend"), or if a request is made to
remove the Legend on a Security, the Securities so issued shall bear the Legend,
or the Legend shall not be removed, as the case may be, unless there is
delivered to the Company and the Registrar such satisfactory evidence, which
shall include an Opinion of Counsel, as may be reasonably required by the
Company and the Registrar, that neither the Legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof comply
with the provisions of Rule 144A or Rule 144 under the Securities Act or that
such Securities are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon (i) provision of such satisfactory evidence, or (ii)
notification by the Company to the Trustee and Registrar of the sale of such
Security pursuant to a registration statement that is effective at the time of
such sale, the Trustee, pursuant to a Company Order, shall authenticate and
deliver a Security that does not bear the Legend. If the Legend is removed from
the face of a Security and the Security is subsequently held by the Company or
an Affiliate of the Company, the Legend shall be reinstated.
Section 2.7 REPLACEMENT SECURITIES. If (a) any mutilated
Security is surrendered to the Trustee, or (b) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is delivered to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon a Company
Order, the Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or stolen Security, a
new Security of like tenor and principal amount, bearing a certificate number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, or is about to be purchased by
the Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Security, pay or purchase such Security, in cash,
Ordinary Shares or a combination thereof as permitted in this Indenture, as the
case may be.
Upon the issuance of any new Securities under this Section
2.7, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 2.7 in lieu
of any mutilated, destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
14
The provisions of this Section 2.7 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.8 OUTSTANDING SECURITIES; DETERMINATIONS OF HOLDERS'
ACTION. Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those cancelled by it, those paid pursuant to Section
2.6(a), those delivered to it for cancellation and those described in this
Section 2.8 as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate thereof holds the Security; provided,
however, that in determining whether the Holders of the requisite principal
amount of Securities have given or concurred in any request, demand,
authorization, direction, notice, consent, waiver or other action hereunder,
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor shall be disregarded and deemed
not to be outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, waiver or other action, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Subject to the foregoing, only Securities outstanding at the time of such
determination shall be considered in any such determination (including, without
limitation, determinations pursuant to Articles VI and IX).
If a Security is replaced pursuant to Section 2.6, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this Indenture,
on a Redemption Date, or on the Business Day following a Purchase Date or a
Change in Control Purchase Date, or on Stated Maturity, money or securities, if
permitted hereunder, sufficient to pay Securities payable on that date, then
immediately after such Redemption Date, Purchase Date, Change in Control
Purchase Date or Stated Maturity, as the case may be, such Securities shall
cease to be outstanding and interest, if any, on such Securities shall cease to
accrue and such Securities shall cease to be convertible; provided, that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made.
If a Security is converted in accordance with Article XII,
then from and after the time of conversion on the Conversion Date, such Security
shall cease to be outstanding and interest, if any, shall cease to accrue on
such Security.
Section 2.9 TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
15
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 2.3, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
Section 2.10 CANCELLATION. All Securities surrendered for
payment, purchase by the Company pursuant to Article V, conversion, redemption
or registration of transfer or exchange shall, if surrendered to any person
other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly cancelled by the Trustee. The Company may not
issue new Securities to replace Securities it has paid or delivered to the
Trustee for cancellation or that any Holder has converted pursuant to Article
XII. No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section 2.10, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of by the Trustee in accordance with the Trustee's customary
procedure.
Section 2.11 PERSONS DEEMED OWNERS. Prior to due presentment
of a Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of the Security or the payment of any Redemption
Price, Purchase Price or Change in Control Purchase Price in respect thereof,
and interest thereon, for the purpose of conversion and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 2.12 GLOBAL SECURITIES. (a) Notwithstanding any other
provisions of this Indenture or the Securities, (A) transfers of a Global
Security, in whole or in part, shall be made only in accordance with Section 2.6
and Section 2.12(a)(i), (B) transfers of a beneficial interest in a Global
Security for a Certificated Security shall comply with Section 2.6 and Section
2.12(a)(ii) below, and (C) transfers of a Certificated Security shall comply
with Section 2.6 and Sections 2.12(a)(iii) and (iv) below.
(i) TRANSFER OF GLOBAL SECURITY. A Global Security may
not be transferred, in whole or in part, to any person other than the
Depositary or a nominee or any successor thereof, and no such transfer
to any such other person may be registered; provided that this clause
(i) shall not prohibit any transfer of a Security that is issued in
exchange for a Global Security but is not itself a Global Security. No
transfer of a Security to any person shall be effective under this
Indenture or the Securities unless and until such Security has been
registered in the name of such person. Nothing in this Section
2.12(a)(i) shall prohibit or render ineffective any transfer of a
beneficial interest
16
in a Global Security effected in accordance with the other provisions
of this Section 2.12(a).
(ii) RESTRICTIONS ON TRANSFER OF A BENEFICIAL INTEREST
IN A GLOBAL SECURITY FOR A CERTIFICATED SECURITY. A beneficial interest
in a Global Security may not be exchanged for a Certificated Security
except if DTC is at any time unwilling or unable to continue as a
Depositary and a successor Depositary is not appointed by the Company
within 90 days and upon satisfaction of the requirements set forth
below. Upon receipt by the Trustee of a transfer of a beneficial
interest in a Global Security in accordance with Applicable Procedures
for a Certificated Security in the form satisfactory to the Trustee,
together with:
(A) so long as the Securities are Restricted Securities,
certification in the form set forth in Exhibit B;
(B) written instructions to the Trustee to make, or
direct the Registrar to make, an adjustment on its books
and records with respect to such Global Security to
reflect a decrease in the aggregate principal amount or
Accreted Value of the Securities represented by the
Global Security, such instructions to contain
information regarding the Depositary account to be
credited with such decrease; and
(C) if the Company so requests, an opinion of counsel or
other evidence reasonably satisfactory to it as to the
compliance with the restrictions set forth in the
Legend, then the Trustee shall cause, or direct the
Registrar to cause, in accordance with the standing
instructions and procedures existing between the
Depositary and the Registrar, the aggregate principal
amount at maturity of the Securities represented by the
Global Security to be decreased by the aggregate
principal amount at maturity of the Certificated
Security to be issued, shall issue such Certificated
Security and shall debit or cause to be debited to the
account of the person specified in such instructions a
beneficial interest in the Global Security equal to the
principal amount at maturity of the Certificated
Security so issued.
(iii) TRANSFER AND EXCHANGE OF CERTIFICATED SECURITIES.
When Certificated Securities are presented to the Registrar with a
request:
(y) to register the transfer of such Certificated
Securities; or
(z) to exchange such Certificated Securities for an
equal principal amount at maturity of Certificated Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Certificated Securities surrendered for transfer or exchange:
17
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(2) so long as such Securities are Restricted Securities, such
Securities are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or
pursuant to clause (A), (B) or (C) below, and are accompanied by
the following additional information and documents, as applicable:
(A) if such Certificated Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect;
or
(B) if such Certificated Securities are being transferred to the
Company, a certification to that effect; or
(C) if such Certificated Securities are being transferred pursuant
to an exemption from registration, (i) a certification to that
effect (in the form set forth in Exhibit B, if applicable) and (ii)
if the Company so requests, an opinion of counsel in form and
substance reasonably satisfactory to it or other evidence in form
and substance reasonably satisfactory to it as to the compliance
with the restrictions set forth in the Legend.
(iv) RESTRICTIONS ON TRANSFER OF A CERTIFICATED SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Certificated Security may not
be exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Certificated Security, duly endorsed
or accompanied by appropriate instruments of transfer, in form satisfactory to
the Trustee, together with:
(I) so long as the Securities are Restricted Securities, certification,
in the form set forth in Exhibit B, that such Certificated Security is
being transferred to a QIB in accordance with Rule 144A; and
(II) written instructions directing the Trustee to make, or to direct
the Registrar to make, an adjustment on its books and records with
respect to such Global Security to reflect an increase in the aggregate
principal amount at maturity of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase, then the Trustee
shall cancel such Certificated Security and cause, or direct the
Registrar to cause, in accordance with the standing instructions and
procedures existing between the
18
Depositary and the Registrar, the aggregate principal amount at
maturity of Securities represented by the Global Security to be
increased by the aggregate principal amount at maturity of the
Certificated Security to be exchanged, and shall credit or cause to be
credited to the account of the person specified in such instructions a
beneficial interest in the Global Security equal to the principal
amount at maturity of the Certificated Security so cancelled. If no
Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Security in the
appropriate principal amount at maturity.
(b) Subject to the succeeding paragraph (c), every Security shall be
subject to the restrictions on transfer provided in the Legend including the
delivery of an opinion of counsel, if so provided. Whenever any Restricted
Security is presented or surrendered for registration of transfer or for
exchange for a Security registered in a name other than that of the Holder, such
Security must be accompanied by a certificate in substantially the form set
forth in Exhibit B, dated the date of such surrender and signed by the Holder of
such Security, as to compliance with such restrictions on transfer. The
Registrar shall not be required to accept for such registration of transfer or
exchange any Security not so accompanied by a properly completed certificate.
(c) The restrictions imposed by the Legend upon the transferability of
any Security shall cease and terminate when such Security has been sold pursuant
to an effective registration statement under the Securities Act or transferred
in compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or, if earlier, upon the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision). Any Security as to which such restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon a
surrender of such Security for exchange to the Registrar in accordance with the
provisions of this Section 2.12 (accompanied, in the event that such
restrictions on transfer have terminated by reason of a transfer in compliance
with Rule 144 or any successor provision, by an opinion of counsel having
substantial experience in practice under the Securities Act and otherwise
reasonably acceptable in form and substance to the Company, addressed to the
Company, to the effect that the transfer of such Security has been made in
compliance with Rule 144 or such successor provision), be exchanged for a new
Security, of like tenor and aggregate principal amount, which shall not bear the
restrictive Legend. The Company shall inform the Trustee of the effective date
of any registration statement registering the Securities under the Securities
Act. The Trustee shall not be liable for any action taken or omitted to be taken
by it in good faith in accordance with the aforementioned opinion of counsel or
registration statement.
(d) As used in the preceding two paragraphs of this Section 2.12, the
term "transfer" encompasses any sale, pledge, transfer, loan, hypothecation, or
other disposition of any Security.
19
(e) The provisions of clauses (1), (2), (3) and (4) below shall apply
only to Global Securities:
(1) Notwithstanding any other provisions of this Indenture or the
Securities, a Global Security shall not be exchanged in whole or in
part for a Security registered in the name of any person other than
the Depositary or one or more nominees thereof, provided that a
Global Security may be exchanged for Securities registered in the
names of any person designated by the Depositary in the event that
(i) the Depositary has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Security or such
Depositary has ceased to be a "clearing agency" registered under
the Exchange Act, and a successor Depositary is not appointed by
the Company within 90 days or (ii) an Event of Default has occurred
and is continuing with respect to the Securities. Any Global
Security exchanged pursuant to clause (i) above shall be so
exchanged in whole and not in part, and any Global Security
exchanged pursuant to clause (ii) above may be exchanged in whole
or from time to time in part as directed by the Depositary. Any
Security issued in exchange for a Global Security or any portion
thereof shall be a Global Security; provided that any such Security
so issued that is registered in the name of a person other than the
Depositary or a nominee thereof shall not be a Global Security.
(2) Securities issued in exchange for a Global Security or any portion
thereof shall be issued in definitive, fully registered form,
without interest coupons, shall have an aggregate principal amount
at maturity equal to that of such Global Security or portion
thereof to be so exchanged, shall be registered in such names and
be in such authorized denominations as the Depositary shall
designate and shall bear the applicable legends provided for
herein. Any Global Security to be exchanged in whole shall be
surrendered by the Depositary to the Trustee, as Registrar. With
regard to any Global Security to be exchanged in part, either such
Global Security shall be so surrendered for exchange or, if the
Trustee is acting as custodian for the Depositary or its nominee
with respect to such Global Security, the principal amount at
maturity thereof shall be reduced, by an amount equal to the
portion thereof to be so exchanged, by means of an appropriate
adjustment made on the records of the Trustee. Upon any such
surrender or adjustment, the Trustee shall authenticate and deliver
the Security issuable on such exchange to or upon the order of the
Depositary or an authorized representative thereof.
(3) Subject to the provisions of clause (5) below, the registered
Holder may grant proxies and otherwise authorize any person,
including Agent Members (as defined below) and persons that may
hold interests through Agent Members, to take any action which a
holder is entitled to take under this Indenture or the Securities.
(4) In the event of the occurrence of any of the events specified in
clause (1) above, the Company will promptly make available to the
Trustee a
20
reasonable supply of Certificated Securities in definitive, fully
registered form, without interest coupons.
(5) Neither any members of, or participants in, the Depositary
(collectively, the "Agent Members") nor any other persons on whose
behalf Agent Members may act shall have any rights under this
Indenture with respect to any Global Security registered in the
name of the Depositary or any nominee thereof, or under any such
Global Security, and the Depositary or such nominee, as the case
may be, may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the absolute owner and holder of such
Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or
any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or such nominee, as the case may be, or impair, as
between the Depositary, its Agent Members and any other person on
whose behalf an Agent Member may act, the operation of customary
practices of such Persons governing the exercise of the rights of a
holder of any Security.
Section 2.13 CUSIP NUMBERS. The Company may issue the Securities with
one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
Section 2.14 ORIGINAL ISSUE DISCOUNT. The Trustee on behalf of the
Holders agrees (i) that for United States federal income tax purposes the
Securities will be treated as indebtedness subject to the Treasury regulations
governing contingent payment debt instruments, (ii) that the Holders will report
original issue discount and interest on the Securities in accordance with the
Company's determination of both the "comparable yield" and the "projected
payment schedule" and (iii) to be bound by the Company's application of the
Treasury regulations that govern contingent payment debt instruments. For this
purpose, the "comparable yield" for the Securities is 7.04 % compounded
semi-annually and the "projected payment schedule" may be obtained by contacting
the Company at the address set forth in Section 13.2. The Company shall file
with the Trustee no later than the end of each calendar year (i) a written
notice specifying the amount of original issue discount (including daily rates
and accrual periods) accrued on outstanding Securities as of the end of such
year and (ii) such other specific information relating to such original issue
discount as may then be relevant under the Internal Revenue Code of 1986, as
amended from time to time.
21
ARTICLE III
CONTINGENT CASH INTEREST
Section 3.1 CONTINGENT CASH INTEREST.
Commencing after September 7, 2004 the Company shall make
Contingent Cash Interest payments to the Holders of Securities, as described
below, during any six month period from September 7 to March 6 (inclusive) and
from March 7 to September 6 (inclusive) (each a "Semiannual Period") if, but
only if, the average Securities' Market Price of one Security for the five
Trading Days in the relevant Five-Trading-Day Measurement Period equals 120% or
more of the Accreted Value of such Security to the day immediately preceeding
the first day of the applicable Semiannual Period. During any Semiannual Period
when Contingent Cash Interest is payable pursuant to this section, each
Contingent Cash Interest payment due and payable pursuant to this section on
each $1,000 principal amount at maturity of Securities shall be calculated for
any quarterly period of the applicable Semiannual Period, and in each instance
shall equal the greater of (i) $ .46 multiplied by 5.277 or (ii) the sum of all
Regular Cash Dividends paid by the Company per share on the Ordinary Shares
during the applicable quarter of such Semiannual Period multiplied by the then
aplicable Conversion Rate.
Contingent Cash Interest shall accrue as of the 15th day
preceding the last day of the relevant Semiannual Period (each a "Contingent
Cash Interest Record Date"), or, if the Company pays Regular Cash Dividends on
its Ordinary Shares during a quarter within the relevant Semiannual Period, as
of the Ordinary Shares Record Date (as defined below). If the Company only pays
Regular Cash Dividends for one quarter within the relevant Semiannual Period,
the remaining Contingent Cash Interest will accrue and be payable as of the
Contingent Cash Interest Record Date.
Accrued and unpaid Contingent Cash Interest, if any, shall be
paid on the last day of such Semiannual Period or, if the Company pays a Regular
Cash Dividend on the Ordinary Shares during a Semiannual Period, on the payment
date for the related Ordinary Shares dividend (in each case, a "Contingent Cash
Interest Payment Date").
The Original Issue Discount of the Securities will continue to
accrue whether or not Contingent Cash Interest payments are made or any
Contingent Additional Principal accrues.
Section 3.2 PAYMENT OF CONTINGENT CASH INTEREST.
(a) If applicable, Contingent Cash Interest on any Security
that is payable, and is punctually paid or duly provided for, on any Contingent
Cash Interest Payment Date shall be paid to the person in whose name that
Security is registered on the Contingent Cash Interest Record Date or the
Ordinary Shares Record Date, as applicable, at the office or agency of the
Company maintained for such purpose. Each payment of Contingent Cash Interest on
any Security shall be paid (A) if such Security is held in the form of a Global
Security, in same-day funds by transfer to an account maintained by the payee
located inside the United States, or (B) if such Security is held in the form of
a Certificated Security, by check, mailed to the address of such Holder as set
forth in the Security Register. In the case of a Global Security, Contingent
22
Cash Interest payable, will be paid on the applicable Contingent Cash Interest
Payment Date to the Depositary with respect to that portion of such Global
Security held for its account by Cede & Co., for the purpose of permitting such
party to credit the interest received by it in respect of such Global Security
to the accounts of the beneficial owners thereof.
(b) Any Contingent Cash Interest on any Security that is
payable, but is not punctually paid or duly provided for, within 30 days
following any Contingent Cash Interest Payment Date (herein called "Defaulted
Interest", which term shall include any accrued and unpaid interest that has
accrued on such defaulted amount), shall forthwith cease to be payable to the
registered Holder thereof on the relevant Record Date or Contingent Cash
Interest Record Date, as applicable, by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company at its election in each case,
as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities are registered
at the close of business on a special record date for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of
the proposed payment (which shall not be less than 20 days after such
notice is received by the Trustee), and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit on or prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the persons
entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date (the "Special
Record Date") for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than ten (10) days prior to the date
of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities at his address as it appears on the list of Securityholders
maintained pursuant to Section 2.5, not less than 10 days prior to such
Special Record Date. The Trustee may, in its discretion, in the name
and at the expense of the Company, cause a similar notice to be
published at least once in The Wall Street Journal, but such
publications shall not be a condition precedent to the establishment of
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the
persons in whose names the Securities are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted
Interest on the Securities in any lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities
may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the
23
proposed payment pursuant to this clause, such manner of payment shall
be deemed practicable by the Trustee.
As used in this Article III, "Five-Trading-Day Measurement Period"
means the five consecutive Trading Days ending on the third Trading Day
immediately preceding the first day of the applicable Semiannual Period;
provided, however, that if the Company declares a dividend for which the record
date (the "Ordinary Shares Record Date") falls prior to the first day of the
next Semiannual Period, but the payment date for such dividend for the Ordinary
Shares falls within such Semiannual Period, then the "Five-Trading-Day
Measurement Period" shall mean the five consecutive Trading Days ending on the
third Trading Day immediately preceding such Ordinary Shares Record Date.
"Securities' Market Price" means, as of any date of determination, the average
of the secondary market bid quotations per $1,000 principal amount at maturity
of Securities obtained by the Bid Solicitation Agent for $10 million principal
amount at maturity of Securities at approximately 4:00 p.m., New York City time,
on such determination date from three independent nationally recognized
securities dealers (none of which shall be an Affiliate of the Company) selected
by the Company; provided, however, if (a) at least three such bids are not
obtained by the Bid Solicitation Agent or (b) in the Company's reasonable
judgment, the bid quotations are not indicative of the secondary market value of
the Securities as of such determination date, then the Securities' Market Price
for such determination date shall equal the product of (i) the Conversion Rate
in effect as of such determination date multiplied by (ii) the average Sale
Price of the Ordinary Shares for the five consecutive Trading Days ending on
such determination date, appropriately adjusted to take into account the
occurrence, during the period commencing on the first of such Trading Days
during such five Trading Day period and ending on such determination date, of
any event described in Sections 12.6, 12.7, 12.8 or 12.9 (subject to the
conditions set forth in Section 12.10).
Section 3.3 NOTICE.
Upon determination that Holders of Securities will be entitled to
receive Contingent Cash Interest during a Semiannual Period, prior to the start
of such Semiannual Period, the Company will disseminate a press release through
Dow Jones & Company, Inc. or Bloomberg Business News containing this information
or publish the information on its Web site or through such other public medium
as it may use at that time.
ARTICLE IV
CONTINGENT ADDITIONAL PRINCIPAL
Section 4.1 CONTINGENT ADDITIONAL PRINCIPAL.
On September 7, 2002 and September 7, 2003, if the Sale Price of the
Ordinary Shares is at or below the Ordinary Shares Threshold Price (as set forth
in the first column under the schedule below) for at least 20 Trading Days
during the Thirty-Trading-Day Measurement Period prior to that date, Contingent
Additional Principal shall accrue on the Securities commencing on such date at a
rate of either 0.50% or .645% per year, computed on a semiannual bond equivalent
basis, on the sum of the issue price plus accrued Original Issue Discount to
such date for a period of one year, in accordance with the schedule set forth
below:
24
September 7, 2002
--------------------------------------------------------------------------------------------------------
Ordinary Shares Threshold Price Contingent Additional Adjusted Yield
(expressed as a percentage of the Accreted Conversion Principal
Price of the Securities)
--------------------------------------------------------------------------------------------------------
Equal to or less than 69% and .50% 3.375%
greater than 65%
--------------------------------------------------------------------------------------------------------
Equal to or less than 65% .645% 3.52%
--------------------------------------------------------------------------------------------------------
September 7, 2003
----------------------------------------------------------------------------------- --------------------
Ordinary Shares Threshold Price Contingent Additional Adjusted Yield
(expressed as a percentage of the Accreted Conversion Principal
Price of the Securities)
--------------------------------------------------------------------------------------------------------
Equal to or less than 75% and .50% 3.375%
greater than 72%
----------------------------------------------------------------------------------- --------------------
Equal to or less than 72% .645% 3.52%
----------------------------------------------------------------------------------- --------------------
As used in this Article IV, "Thirty-Trading-Day Measurement
Period" means the 30 consecutive Trading Days ending three Trading Days prior to
September 7, 2002 and September 7, 2003, as the case may be.
No Contingent Additional Principal will accrue after September
7, 2004.
Section 4.2 PAYMENT OF CONTINGENT ADDITIONAL PRINCIPAL.
If payable, the Contingent Additional Principal shall be paid
on the Stated Maturity of the Securities. Contingent Additional Principal shall
be calculated on a semiannual bond equivalent basis, using a 360-day year
consisting of twelve 30-day months.
Section 4.3 NOTICE.
In the event that any Contingent Additional Principal accrues
on the Securities, the Company will disseminate a press release through Dow
Jones & Company, Inc. or Bloomberg Business News containing this information or
publish the information on its Web site or through such other public medium as
it may use at that time. The Company shall also notify the Trustee annually in
writing, at such time that the Company files with the Trustee its annual reports
or other information or documents pursuant to Section 6.2 of the Indenture, of
any accrual of Contingent Additional Principal and the resulting increase in the
principal amount at maturity per Security. Following its receipt of such notice,
the Trustee shall provide such information to DTC for dissemination to the
participants of DTC.
25
ARTICLE V
REDEMPTION AND PURCHASES
Section 5.1 COMPANY'S RIGHT TO REDEEM; NOTICES TO TRUSTEE. The
Company, at its option, may redeem the Securities in accordance with the
provisions of Paragraph 7 of the Securities. If the Company elects to redeem
Securities pursuant to Paragraph 7 of the Securities, it shall notify the
Trustee in writing of the Redemption Date, the principal amount at maturity of
Securities to be redeemed and the Redemption Price.
The Company shall give the notice to the Trustee provided for
in this Section 5.1 by a Company Order, at least 20 days before the Redemption
Date (unless a shorter notice shall be satisfactory to the Trustee).
Section 5.2 SELECTION OF SECURITIES TO BE REDEEMED. If less
than all of the Securities are to be redeemed, unless the procedures of the
Depositary provide otherwise, the Trustee shall select the Securities to be
redeemed by lot, on a pro rata basis or by another method the Trustee considers
fair and appropriate (so long as such method is not prohibited by the rules of
any stock exchange on which the Securities are then listed). The Trustee shall
make the selection at least 15 days but not more than 60 days before the
Redemption Date from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal
amount at maturity of Securities that have denominations larger than $1,000.
Securities and portions of Securities that the Trustee selects
shall be in principal amounts at maturity of $1,000 or an integral multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of the
Securities to be redeemed.
If any Security selected for partial redemption is converted
in part before termination of the conversion right with respect to the portion
of the Security so selected, the converted portion of such Security shall be
deemed (so far as may be) to be the portion selected for redemption. Securities
which have been converted during a selection of Securities to be redeemed may be
treated by the Trustee as outstanding for the purpose of such selection.
Section 5.3 NOTICE OF REDEMPTION. At least 15 days but not
more than 60 days before a Redemption Date, the Company or the Trustee shall
mail a notice of redemption by first-class mail, postage prepaid, to each Holder
of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the then existing Conversion Rate;
26
(4) the name and address of the Paying Agent and the
Conversion Agent;
(5) that Securities called for redemption may be converted at
any time before the close of business on the date that is
two Business Days prior to the Redemption Date;
(6) that Holders who want to convert their Securities must
satisfy the requirements set forth in Paragraph 10 of the
Securities;
(7) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;
(8) if fewer than all of the outstanding Securities are to be
redeemed, the certificate numbers, if any, and principal
amounts of the particular Securities to be redeemed;
(9) that, unless the Company defaults in making payment of
such Redemption Price, interest, if any, on Securities
called for redemption will cease to accrue on and after
the Redemption Date; and
(10) the CUSIP number(s) of the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense, provided that the
Company makes such request at least three Business Days prior to the date by
which such notice of redemption must be given to Holders in accordance with this
Section 5.3.
Section 5.4 EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is given, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price stated in the notice except for
Securities which are converted in accordance with the terms of this Indenture.
Upon surrender to the Paying Agent, such Securities shall be paid at the
Redemption Price stated in the notice.
Section 5.5 DEPOSIT OF REDEMPTION PRICE. Prior to 10:00 a.m.
(New York City time), on the Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or a Subsidiary or an Affiliate of any of them
is the Paying Agent, shall segregate and hold in trust) money sufficient to pay
the Redemption Price of all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which on or prior
thereto have been delivered by the Company to the Trustee for cancellation or
have been converted. The Paying Agent shall as promptly as practicable return to
the Company any money not required for that purpose because of conversion of
Securities pursuant to Article XII. If such money is then held by the Company in
trust and is not required for such purpose it shall be discharged from such
trust.
Section 5.6 SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security in an authorized
denomination equal in principal amount at maturity to the unredeemed portion of
the Security surrendered.
27
Section 5.7 REPURCHASE OF SECURITIES BY THE COMPANY AT OPTION
OF THE HOLDER. (a) General. Securities shall be purchased by the Company
pursuant to Paragraph 9 of the Securities at the option of the Holder on
September 7, 2002, September 7, 2003, September 7, 2004, September 7, 2006,
September 7, 2008, September 7, 2011 and September 7, 2016 or the next Business
Day following such dates to the extent such dates are not Business Days (each, a
"Purchase Date"), at the Accreted Value plus accrued and unpaid Contingent Cash
Interest, if any, to the Purchase Date (the "Purchase Price"). Purchases of
Securities hereunder shall be made, at the option of the Holder thereof, upon:
(1) delivery to the Paying Agent by the Holder of a written
notice of purchase (a "Purchase Notice") during the
period beginning at any time from the opening of business
on the date that is 20 Business Days prior to the
relevant Purchase Date until the close of business on the
last day prior to such Purchase Date stating:
(A) the certificate number of the Security which the
Holder will deliver to be purchased or, if the Security
is not certificated, the notice must comply with the
appropriate Depositary procedures;
(B) the portion of the principal amount at maturity of
the Security which the Holder will deliver to be
purchased, which portion must be in principal amounts at
maturity of $1,000 or an integral multiple thereof,
(C) that such Security shall be purchased by the Company
as of the Purchase Date pursuant to the terms and
conditions specified in Paragraph 9 of the Securities and
in this Indenture, and
(D) in the event the Company elects, pursuant to Section
5.7(b), to pay the Purchase Price, in whole or in part,
in Ordinary Shares but such portion of the Purchase Price
shall ultimately be paid to such Holder entirely in cash
because any of the conditions to payment of the Purchase
Price in Ordinary Shares is not satisfied prior to the
close of business on the last day prior to the relevant
Purchase Date, as set forth in Section 5.7(d), whether
such Holder elects (i) to withdraw such Purchase Notice
as to some or all of the Securities to which such
Purchase Notice relates (stating the principal amount and
certificate numbers, if any, of the Securities as to
which such withdrawal shall relate), or (ii) to receive
cash in respect of the entire Purchase Price for all
Securities (or portions thereof) to which such Purchase
Notice relates; and
(2) delivery of such Security to the Paying Agent prior to,
on or after the Purchase Date (together with all
necessary endorsements) at the offices of the Paying
Agent, such delivery being a condition to receipt by the
Holder of the Purchase Price therefor; provided, however,
that such Purchase Price shall be so paid pursuant to
this Section 5.7 only if the Security so delivered to the
Paying Agent shall conform in all respects to the
description thereof in the related Purchase Notice, as
determined by the Company.
28
If a Holder, in such Holder's Purchase Notice and in any
written notice of withdrawal delivered by such Holder pursuant to the terms of
Section 5.9, fails to indicate such Holder's choice with respect to the election
set forth in clause (D) of Section 5.7(a)(1), such Holder shall be deemed to
have elected to receive cash in respect of the entire Purchase Price for all
Securities subject to such Purchase Notice in the circumstances set forth in
such clause (D).
The Company shall purchase from the Holder thereof, pursuant
to this Section 5.7, a portion of a Security, if the principal amount at
maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions
of this Indenture that apply to the purchase of all of a Security also apply to
the purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the
provisions of this Section 5.7 shall be consummated by the delivery to the
Paying Agent of the consideration to be received by the Holder promptly
following the later of the Purchase Date and the time of delivery of the
Security.
Notwithstanding anything herein to the contrary, any Holder
delivering to the Paying Agent the Purchase Notice contemplated by this Section
5.7(a) shall have the right to withdraw such Purchase Notice at any time prior
to the close of business on the last day prior to the Purchase Date by delivery
of a written notice of withdrawal to the Paying Agent in accordance with Section
5.9.
The Paying Agent shall promptly notify the Company of the
receipt by it of any Purchase Notice or written notice of withdrawal thereof.
(b) COMPANY'S RIGHT TO ELECT MANNER OF PAYMENT OF PURCHASE
PRICE FOR PAYMENT. The Securities to be purchased on any Purchase Date pursuant
to Section 5.7(a) may be paid for, in whole or in part, at the election of the
Company, in U.S. legal tender ("cash") or Ordinary Shares, or in any combination
of cash and Ordinary Shares, subject to the conditions set forth in Sections
5.7(c) and (d). The Company shall designate, in the Company Notice delivered
pursuant to Section 5.7(e), whether the Company will purchase the Securities for
cash or Ordinary Shares, or, if a combination thereof, the percentages of the
Purchase Price of Securities in respect of which it will pay in cash and in
Ordinary Shares; provided that the Company will pay cash for fractional
interests in Ordinary Shares. For purposes of determining the existence of
potential fractional interests, all Securities subject to purchase by the
Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented). Each Holder whose Securities are
purchased pursuant to this Section 5.7 shall receive the same percentage of cash
or Ordinary Shares in payment of the Purchase Price for such Securities, except
(i) as provided in Section 5.7(d) with regard to the payment of cash in lieu of
fractional Ordinary Shares and (ii) in the event that the Company is unable to
purchase the Securities of a Holder or Holders for Ordinary Shares because any
necessary qualifications or registrations of the Ordinary Shares under
applicable state securities laws cannot be obtained, the Company may purchase
the Securities of such Holder or Holders for cash. The Company may not change
its election with respect to the consideration (or components or percentages of
components thereof) to be paid once the Company has given its Company Notice to
Holders except pursuant to this Section 5.7(b) or pursuant to Section 5.7(d) in
the event of a failure to satisfy, prior to the close of
29
business on the last day prior to the Purchase Date, any condition to the
payment of the Purchase Price, in whole or in part, in Ordinary Shares.
At least three Business Days before each Company Notice Date,
the Company shall deliver an Officers' Certificate to the Trustee specifying:
(i) the manner of payment selected by the Company,
(ii) the information required by Section 5.7(e) in the
Company Notice,
(iii) if the Company elects to pay the Purchase Price, or
a specified percentage thereof, in Ordinary Shares, that the conditions
to such manner of payment set forth in Section 5.7(d) have been or will
be complied with, and
(iv) whether the Company desires the Trustee to give the
Company Notice required by Section 5.7(e).
(c) PURCHASE WITH CASH. At the option of the Company, the
Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 5.7(a) has been given, or a specified percentage
thereof, may be paid by the Company with cash equal to the aggregate
Purchase Price of such Securities.
(d) PAYMENT BY ISSUANCE OF ORDINARY SHARES. At the option of
the Company, the Purchase Price of Securities in respect of which a
Purchase Notice pursuant to Section 5.7(a) has been given, or a
specified percentage thereof, may be paid by the Company by the
issuance of a number of Ordinary Shares equal to the quotient obtained
by dividing (i) the portion of the Purchase Price to be paid in
Ordinary Shares by (ii) the Market Price of one Ordinary Share as
determined by the Company in the Company Notice, subject to the next
succeeding paragraph.
The Company will not issue fractional Ordinary Shares in
payment of the Purchase Price. Instead, the Company will pay cash based on the
current Market Price for all fractional shares. The current market value of a
fractional share shall be determined to the nearest 1/1,000th of a share, by
multiplying the Market Price of a full Ordinary Share by the fractional amount
and rounding to the nearest whole cent. It is understood that if a Holder elects
to have more than one Security purchased, the number of Ordinary Shares shall be
based on the aggregate amount of Securities to be purchased.
If the Company elects to purchase the Securities in whole or
in part by the issuance of Ordinary Shares, the Company Notice, as provided in
Section 5.7(e), shall be sent to the Holders (and to beneficial owners as and to
the extent required by applicable law) not less than 20 Business Days prior to
such Purchase Date (the "Company Notice Date").
The Company's right to exercise its election to purchase
Securities through the issuance of Ordinary Shares shall be conditioned upon:
(i) the Company's having given timely Company Notice of an
election to purchase all or a specified percentage of the Securities
with Ordinary Shares as provided herein;
30
(ii) the registration of such Ordinary Shares under the
Securities Act of 1933, as amended (the "Securities Act"), or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
each case, if required;
(iii) the listing of such Ordinary Shares on the principal
national securities exchange (currently the NYSE) on which the Ordinary
Shares are listed;
(iv) any necessary qualification or registration under
applicable state securities laws or the availability of an exemption
from such qualification and registration; and
(v) the receipt by the Trustee of an Officers' Certificate
and an Opinion of Counsel each stating that (A) the terms of the
issuance of the Ordinary Shares are in conformity with this Indenture
and (B) the Ordinary Shares to be issued by the Company in payment of
the Purchase Price in respect of Securities have been duly authorized
and, when issued and delivered pursuant to the terms of this Indenture
in payment of the Purchase Price in respect of the Securities, will be
validly issued, fully paid and non-assessable and, to the best of such
counsel's knowledge, free from preemptive rights, and, in the case of
such Officers' Certificate, stating that the conditions above and the
condition set forth in the second succeeding sentence have been
satisfied and, in the case of such Opinion of Counsel, stating that the
conditions in clauses (i) through (iv) above have been satisfied.
Such Officers' Certificate shall also set forth the number of
Ordinary Shares to be issued for each $1,000 principal amount at maturity of
Securities and the Sale Price of an Ordinary Share on each Trading Day during
the period beginning on the first Trading Day of the period during which the
Market Price is calculated and ending on the third Business Day prior to the
applicable Purchase Date. The Company may pay the Purchase Price (or any portion
thereof) in Ordinary Shares only if the information necessary to calculate the
Market Price is published in a daily newspaper of national circulation or is
otherwise publicly available or obtainable (e.g., by dissemination on the World
Wide Web or by other public means). If the foregoing conditions are not
satisfied with respect to a Holder or Holders prior to the close of business on
the last day prior to the Purchase Date, and the Company has elected to purchase
the Securities pursuant to this Section 5.7 through the issuance of Ordinary
Shares, the Company shall pay the entire Purchase Price of the Securities of
such Holder or Holders in cash.
The "Market Price" means the average of the Sale Prices of the
Ordinary Shares for the five consecutive Trading Day period ending on the third
Business Day prior to the applicable Purchase Date (if the third Business Day
prior to the applicable Purchase Date is a Trading Day, or if not, then on the
last Trading Day prior to the third Business Day), appropriately adjusted to
take into account the occurrence, during the period commencing on the first of
the Trading Days during the five Trading Day period and ending on the Purchase
Date, of any event described in Sections 12.6, 12.7 or 12.8; subject, however,
to the conditions set forth in Sections 12.10 and 12.11.
The "Sale Price" of the Ordinary Shares on any date means the
closing per share sale price (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more
31
than one in either case, the average of the average bid and the average asked
prices) on such date as reported on the NYSE or, if the Ordinary Shares are not
listed on the NYSE, then on the principal other U.S. national or regional
securities exchange on which the Ordinary Shares then are listed, or if the
Ordinary Shares are not listed on a U.S. national or regional exchange, as
reported on the National Association of Securities Dealers Automated Quotation
System, or if the Ordinary Shares are not quoted on the National Association of
Securities Dealers Automated Quotation System, as reported on the principal
other market on which the Ordinary Shares are then traded. In the absence of
such quotations, the Company shall be entitled to determine the sales price on
the basis of such quotations as it considers appropriate.
Upon determination of the actual number of Ordinary Shares to
be issued upon redemption of Securities, the Company will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on the Company's Web site or through
such other public medium as the Company may use at that time.
(e) NOTICE OF ELECTION. In connection with any election by the
Company to pay the Purchase Price for the Securities in whole or in part by the
issuance of Ordinary Shares pursuant to Paragraph 9 of the Securities, the
Company shall give notice to Holders setting forth information specified in this
Section 5.7(e) (the "Company Notice").
The Company Notice shall:
(1) state that each Holder will receive Ordinary Shares with a
Market Price determined as of a specified date prior to
the Purchase Date equal to such specified percentage of
the Purchase Price of the Securities held by such Holder
(except any cash amount to be paid in lieu of fractional
shares);
(2) set forth the method of calculating the Market Price of
the Ordinary Shares; and
(3) state that because the Market Price of Ordinary Shares
will be determined prior to the Purchase Date, Holders of
the Securities will bear the market risk with respect to
the value of the Ordinary Shares to be received from the
date such Market Price is determined to the Purchase Date.
In any case, each Company Notice shall include a form of
Purchase Notice to be completed by a Holder and shall state:
(i) the Purchase Price and the then Conversion Rate;
(ii) the name and address of the Paying Agent and the
Conversion Agent;
(iii) that Securities as to which a Purchase Notice has
been given may be converted if they are otherwise convertible only in
accordance with Article X hereof and Paragraph 10 of the Securities and
if the applicable Purchase Notice has been withdrawn in accordance with
the terms of this Indenture;
32
(iv) that Securities must be surrendered to the Paying
Agent to collect payment;
(v) that the Purchase Price for any security as to which a
Purchase Notice has been given and not withdrawn will be paid promptly
following the later of the Purchase Date and the time of surrender of
such Security as described in (iv);
(vi) the procedures the Holder must follow to exercise its
right to require the Company to repurchase any of its Securities under
this Section 5.7 and a brief description of those rights;
(vii) briefly, the conversion rights of the Securities;
(viii) the procedures for withdrawing a Purchase Notice
(including, without limitation, for a conditional withdrawal pursuant
to the terms of Section 5.7(a)(1)(D) or Section 5.9);
(ix) that, unless the Company defaults in making payment
on Securities for which a Purchase Notice has been submitted, interest,
if any, on such Securities will cease to accrue on and after the
Purchase Date; and
(x) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give such Company Notice
in the Company's name and at the Company's expense; provided, however, that, in
all cases, the text of such Company Notice shall be prepared by the Company.
(f) COVENANTS OF THE COMPANY. All Ordinary Shares delivered
upon purchase of the Securities pursuant to Section 5.7 or Section 5.8 shall be
newly issued shares or treasury shares, shall be duly authorized, validly
issued, fully paid and nonassessable, and shall be free from preemptive rights
and free of any lien or adverse claim.
(g) PROCEDURE UPON PURCHASE. The Company shall deposit cash
(in respect of cash purchases under this Section 5.7 or for fractional
interests, as applicable) or Ordinary Shares, or a combination thereof, as
applicable, at the time and in the manner as provided in Section 5.10,
sufficient to pay the aggregate Purchase Price of all Securities to be purchased
pursuant to this Section 5.7. As soon as practicable after the Purchase Date,
the Company shall deliver to each Holder entitled to receive Ordinary Shares
through the Paying Agent, a certificate in global form for the number of full
Ordinary Shares issuable in payment of the Purchase Price and cash in lieu of
any fractional interests. The person in whose name the certificate in global
form for the Ordinary Shares is registered shall be treated as a holder of
record of the Ordinary Shares on the Business Day following the Purchase Date.
No payment or adjustment will be made for dividends on the Ordinary Shares on
the record date for which occurred on or prior to the Purchase Date.
(h) TAXES. If a Holder of a purchased Security is paid in
Ordinary Shares pursuant to this Section 5.7, the Company shall pay all stamp
and other duties, if any, which may be imposed by the United States or any
political subdivision thereof or taxing authority thereof
33
or therein with respect to the issuance of Ordinary Shares. However, the Holder
shall pay any such tax which is due because the Holder requests the Ordinary
Shares to be issued in a name other than the Holder's name. The Paying Agent may
refuse to deliver the certificates representing the Ordinary Shares being issued
in a name other than the Holder's name until the Paying Agent receives a sum
sufficient to pay any tax which will be due because the Ordinary Shares are to
be issued in a name other than the Holder's name. Nothing herein shall preclude
any income tax withholding required by law or regulations.
Section 5.8 PURCHASE OF SECURITIES AT OPTION OF THE HOLDER
UPON A CHANGE IN CONTROL. (a) If a Change in Control occurs, the Securities not
previously purchased by the Company shall be purchased by the Company, at the
option of the Holder thereof, at the Purchase Price on the Change in Control
Purchase Date (the "Change in Control Purchase Price"), as of the date that is
45 days after the date of the Change in Control Purchase Notice delivered by the
Company (the "Change in Control Purchase Date"), subject to satisfaction by or
on behalf of the Holder of the requirements set forth in Section 5.8(c).
A "Change in Control" shall be deemed to have occurred at such
time after the Securities are originally issued as either of the following
events shall occur:
(i) any person, including any syndicate or group deemed to
be a "person" under Section 13(d)(3) of the Exchange Act, acquires
beneficial ownership, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of transactions, of
shares of the Company's Capital Stock entitling the person to exercise
50% or more of the total voting power of all shares of the Company's
Capital Stock that are entitled to vote generally in elections of
directors, other than an acquisition by the Company, any of its
Subsidiaries or any of its employee benefit plans and other than any
transaction contemplated by clause (a)(ii)(B) of this Section 5.8; or
(ii) the Company merges or consolidates with or into any
other person (other than a Subsidiary), any merger of another person
(other than a Subsidiary) into the Company, or the Company conveys,
sells, transfers or leases all or substantially all of its assets to
another person (other than a Subsidiary), other than any transaction:
(A) that does not result in any reclassification, conversion, exchange
or cancellation of the Company's outstanding Ordinary Shares (other
than the cancellation of any of the Company's outstanding Ordinary
Shares held by the person with whom the Company merges or
consolidates), or (B) pursuant to which the holders of the Company's
Ordinary Shares immediately prior to the transaction have the
entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of Capital Stock entitled to vote
generally in the election of directors of the continuing or surviving
corporation immediately after the transaction, or (C) which is effected
solely to change the Company's jurisdiction of incorporation and
results in a reclassification, conversion or exchange of the Company's
outstanding Ordinary Shares solely into shares of common stock of the
surviving entity.
Notwithstanding the foregoing provisions of this Section 5.8, a Change in
Control shall not be deemed to have occurred if (A) the closing price per
Ordinary Share on the NYSE or, if the Ordinary Shares are not listed on the
NYSE, on the principal other U.S. national or regional
34
securities exchange on which the Ordinary Shares are then listed, or if the
Ordinary Shares are not listed on a U.S. national or regional exchange, as
reported on the National Association of Securities Dealers Automated Quotation
System, of if the Ordinary Shares are not quoted on the National Association of
Securities Dealers Automated Quotation System, as reported on the principal
other market on which the Ordinary Shares are then traded, for any five trading
days within the period of 10 consecutive trading days ending immediately after
the later of the Change in Control or the public announcement of the Change in
Control, in the case of a Change in Control relating to an acquisition of
Capital Stock, or the period of 10 consecutive trading days ending immediately
before the Change in Control, in the case of a Change in Control relating to a
merger, consolidation or asset sale, equals or exceeds 105% of the conversion
price of the Securities in effect on each of those trading days or (B) all of
the consideration (excluding cash payments for fractional shares and cash
payments made pursuant to dissenters' appraisal rights) in a merger or
consolidation otherwise constituting a Change in Control under clause (i) and/or
clause (ii) above consists of shares of common stock traded on a national
securities exchange or quoted on the Nasdaq National Market (or will be so
traded or quoted immediately following the merger or consolidation) and as a
result of the merger or consolidation the Securities become convertible into
such common stock. For purposes of this Section 5.8, (x) the conversion price is
equal to $1,000 divided by the Conversion Rate, (y) whether a person is a
"beneficial owner" shall be determined in accordance with Rule 13d-3 under the
Exchange Act and (z) "person" includes any syndicate or group that would be
deemed to be a "person" under Section 13(d)(3) of the Exchange Act.
"Associate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date hereof.
At the option of the Company, the Change in Control Purchase
Price of Securities in respect of which a Change in Control Purchase Notice
pursuant to Section 5.8(b) has been given may be paid by the Company by the
issuance of a number of Ordinary Shares equal to the quotient obtained by
dividing (i) the amount of cash to which the Holders would have been entitled
had the Company elected to pay all of the Change in Control Purchase Price of
such Securities in cash, by (ii) the product of (A) the Market Price of Ordinary
Shares, subject to the next succeeding paragraph and (B) 0.95.
The Company will not issue fractional Ordinary Shares in payment of the
Change in Control Purchase Price. Instead the Company will pay cash based on the
current Market Price for all fractional shares. The current market value of a
fractional share shall be determined to the nearest 1/1,000th of a share, by
multiplying the Market Price of a full Ordinary Share by the fractional amount
and rounding to the nearest whole cent. It is understood that if a Holder elects
to have more than one Security purchased, the number of Ordinary Shares shall be
based on the aggregate amount of Securities to be purchased.
In the event that the Company is unable to purchase the
Securities of a Holder or Holders for Ordinary Shares because any necessary
qualifications or registrations of the Ordinary Shares under applicable state
securities laws cannot be obtained, the Company may purchase the Securities of
such Holder or Holders for cash. The Company may not change its election with
respect to the consideration to be paid once the Company has given its Change in
Control Notice to Securityholders except pursuant to this Section 5.8(a) or
pursuant to Section 5.8(b) in the
35
event of a failure to satisfy, prior to the close of business on the Change in
Control Purchase Date, any condition to the payment of the Change in Control
Purchase Price in Ordinary Shares.
At least three Business Days before the Change in Control
Notice Date (as defined below), the Company shall deliver an Officers'
Certificate to the Trustee specifying:
(i) the manner of payment selected by the Company;
(ii) the information required by Section 5.8(b);
(iii) if the Company elects to pay the Change in Control
Purchase Price in Ordinary Shares, that the conditions to such manner of payment
set forth in Section 5.8(a) have been or will be complied with; and
(iv) whether the Company desires the Trustee to give the
Change in Control Notice required by Section 5.8(b).
The Company's right to exercise its election to purchase
Securities through the issuance of Ordinary Shares shall be conditioned upon:
(i) the Company's giving of timely Change in Control Notice to
purchase all of the Securities with Ordinary Shares as provided herein;
(ii) the registration of such Ordinary Shares under the
Securities Act or the Exchange Act, in each case, if required;
(iii) such Ordinary Shares shall have been listed on the
principal national or regional securities exchange (currently the NYSE) on which
the Ordinary Shares are then listed, or if the Ordinary Shares are not listed on
a national or regional exchange, then on the National Association of Securities
Dealers Automated Quotation System, or if the Ordinary Shares are not quoted on
the National Association of Securities Dealers Automated Quotation System, then
on the principal other market on which the Ordinary Shares are then traded;
(iv) any necessary qualification or registration under
applicable state securities laws or the availability of an exemption from such
qualification and registration; and
(v) the receipt by the Trustee of an Officers' Certificate and
an Opinion of Counsel each stating that (A) the terms of the issuance of the
Ordinary Shares are in conformity with this Indenture and (B) the Ordinary
Shares to be issued by the Company in payment of the Change in Control Purchase
Price in respect of Securities have been duly authorized and, when issued and
delivered pursuant to the terms of this Indenture in payment of the Change in
Control Purchase Price in respect of the Securities, will be validly issued,
fully paid and non-assessable and, to the best of such counsel's knowledge, free
from preemptive rights, and, in the case of such Officers' Certificate, stating
that the conditions above and the condition set forth in the second succeeding
sentence have been satisfied and, in the case of such Opinion of Counsel,
stating that the conditions above have been satisfied.
36
Such Officers' Certificate shall also set forth (i) the number
of Ordinary Shares of to be issued for each $1,000 principal amount at maturity
of Securities, (ii) the Sale Price of an Ordinary Share on each Trading Day
during the period commencing on the first Trading Day of the period during which
the Market Price is calculated and ending on the third Business Day prior to the
Change in Control Purchase Date and (iii) the Market Price of the Ordinary
Shares. The Company may pay the Change in Control Purchase Price in Ordinary
Shares only if the information necessary to calculate the Market Price is
published in a daily newspaper of national circulation or is otherwise publicly
available or obtainable (e.g., by dissemination on the World Wide Web or by
other public means). If the foregoing conditions are not satisfied with respect
to a Holder or Holders prior to the close of business on the Change in Control
Purchase Date and the Company has elected to purchase the Securities pursuant to
this Section 5.8 through the issuance of Ordinary Shares, the Company shall pay
the entire Purchase Price of the Securities of such Holder or Holders in cash.
Upon determination of the actual number of Ordinary Shares to
be issued for each $1,000 principal amount at maturity of Securities (not later
than the third Business Day prior to the Change in Control Purchase Date), the
Company shall publish such determination through Dow Jones & Company, Inc. or
Bloomberg Business News or otherwise make such information publicly available.
(b) No later than 30 days after the occurrence of a Change in
Control, the Company shall mail a written notice of the Change in Control (the
"Change in Control Notice," the date of such mailing, the "Change in Control
Notice Date") by first-class mail to the Trustee and to each Holder (and to
beneficial owners as required by applicable law). The notice shall include a
form of Change in Control Purchase Notice to be completed by the Holder and
shall state:
(1) briefly, the nature of the Change in Control and the date
of such Change in Control;
(2) the date by which the Change in Control Purchase Notice
pursuant to this Section 5.8 must be given;
(3) the Change in Control Purchase Date;
(4) the Change in Control Purchase Price;
(5) the name and address of the Paying Agent and the
Conversion Agent;
(6) the then existing Conversion Rate and any adjustments
thereto;
(7) that the Securities as to which a Change in Control
Purchase Notice has been given may be converted if they
are otherwise convertible pursuant to Article XII hereof
only if the Change in Control Purchase Notice has been
withdrawn in accordance with the terms of this Indenture;
(8) that the Securities must be surrendered to the Paying
Agent to collect payment;
37
(9) that the Change in Control Purchase Price for any
Security as to which a Change in Control Purchase Notice
has been duly given and not withdrawn will be paid
promptly following the later of the Change in Control
Purchase Date and the time of surrender of such Security
as described in (8);
(10) briefly, the procedures the Holder must follow to
exercise rights under this Section 5.8;
(11) briefly, the conversion rights, if any, of the
Securities;
(12) the procedures for withdrawing a Change in Control
Purchase Notice;
(13) that, unless the Company defaults in making payment of
such Change in Control Purchase Price, interest, if any,
on Securities surrendered for purchase by the Company
will cease to accrue on and after the Change in Control
Purchase Date; and
(14) the CUSIP number(s) of the Securities.
In the event the Company has elected to pay the Change in
Control Purchase Price with Ordinary Shares, the Change in Control Notice shall:
(1) state that the Company will pay the Change in Control
Purchase Price with Ordinary Shares;
(2) set forth the method of calculating the number of Ordinary
Shares to be paid;
(3) state that because the Market Price of the Ordinary Shares
will be determined prior to the Change in Control Purchase Date, Holders of the
Securities will bear the market risk with respect to the value of the Ordinary
Shares to be received from the date such Market Price is determined to the
Change in Control Purchase Date.
(c) A Holder may exercise its rights specified in Section
5.8(a) upon delivery of a written notice of purchase (a "Change in Control
Purchase Notice") to the Paying Agent at any time on or prior to the 30th day
after the date the Company delivers its written Change in Control Purchase
Notice, stating:
(1) the certificate number of the Security which the Holder
will deliver to be purchased or, if the Security is not
certificated, the notice must comply with the appropriate
Depositary procedures;
(2) the portion of the principal amount of the Security which
the Holder will deliver to be purchased, which portion
must be $1,000 or an integral multiple thereof;
(3) that such Security shall be purchased pursuant to the
terms and conditions specified in Paragraph 9 of the
Securities and this Indenture; and
38
(4) in the event the Company elects, pursuant to Section
5.8(b), to pay the Change in Control Purchase Price in
Ordinary Shares but the Change in Control Purchase Price
shall ultimately be payable to such Holder in cash
because any of the conditions to payment of the Change in
Control Purchase Price in Ordinary Shares are not
satisfied prior to the close of business on the Change in
Control Purchase Date, whether such Holder elects (i) to
withdraw such Change in Control Purchase Notice as to
some or all of the Securities to which such Change in
Control Purchase Notice relates (stating the principal
amount at maturity and certificate numbers, if any, of
the Securities as to which such withdrawal shall relate),
or (ii) to receive cash in respect of the entire Change
in Control Purchase Price for all Securities (or portions
thereof) to which such Change in Control Purchase Notice
relates.
If a Holder, in such Holder's Change in Control Purchase
Notice and in any written notice of withdrawal delivered by such Holder pursuant
to the terms of Section 5.9, fails to indicate such Holder's choice with respect
to the election set forth in clause (4) above, such Holder shall be deemed to
have elected to receive cash in respect of the Change in Control Purchase Price
for all Securities subject to such Change in Control Purchase Notice in the
circumstances set forth in such clause (4).
The delivery of such Security to the Paying Agent with the
Change in Control Purchase Notice (together with all necessary endorsements) at
the offices of the Paying Agent shall be a condition to the receipt by the
Holder of the Change in Control Purchase Price therefor; provided, however, that
such Change in Control Purchase Price shall be so paid pursuant to this Section
5.8 only if the Security so delivered to the Paying Agent shall conform in all
material respects to the description thereof set forth in the related Change in
Control Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant
to this Section 5.8, a portion of a Security if the principal amount at maturity
of such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the
provisions of this Section 5.8 shall be consummated by the delivery of the
consideration to be received by the Holder on the Change of Control Purchase
Date.
(d) COVENANTS OF THE COMPANY. All Ordinary Shares delivered
upon purchase of the Securities shall be newly issued shares or treasury shares,
shall be duly authorized, validly issued, fully paid and nonassessable, and
shall be free from preemptive rights and free of any lien or adverse claim.
(e) PROCEDURE UPON PURCHASE. The Company shall deposit cash
(in respect of cash purchases under Section 5.8 or for fractional Ordinary
Shares, as applicable) or Ordinary Shares, or a combination thereof, as
applicable, at the time and in the manner as provided in Section 5.10,
sufficient to pay the aggregate Change in Control Purchase Price of all
Securities to
39
be purchased pursuant to this Section 5.8. As soon as practicable after the
Change in Control Purchase Date, the Company shall deliver to each Holder
entitled to receive Ordinary Shares through the Paying Agent, a certificate in
global form for the number of full Ordinary Shares issuable in payment of the
Change in Control Purchase Price and cash in lieu of any fractional shares. The
person in whose name the certificate in global form for the Ordinary Shares is
registered shall be treated as a holder of record of the Ordinary Shares on the
Business Day following the Change in Control Purchase Date. No payment or
adjustment will be made for dividends on the Ordinary Shares on the record date
for which occurred on or prior to the Change in Control Purchase Date.
(f) TAXES. If a Holder of a purchased Security is paid in
Ordinary Shares pursuant to this Section 5.8, the Company shall pay all stamp
and other duties, if any, which may be imposed by the United States or any
political subdivision thereof or taxing authority thereof or therein with
respect to the issuance of Ordinary Shares. However, the Holder shall pay any
such tax which is due because the Holder requests the Ordinary Shares to be
issued in a name other than the Holder's name. The Paying Agent may refuse to
deliver the certificates representing the Ordinary Shares being issued in a name
other than the Holder's name until the Paying Agent receives a sum sufficient to
pay any tax which will be due because the Ordinary Shares are to be issued in a
name other than the Holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations.
Section 5.9 EFFECT OF PURCHASE NOTICE OR CHANGE IN CONTROL
PURCHASE NOTICE. Upon receipt by the Paying Agent of the Purchase Notice or
Change in Control Purchase Notice specified in Section 5.7(a) or Section 5.8(c),
as applicable, the Holder of the Security in respect of which such Purchase
Notice or Change in Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice, as the case
may be, is withdrawn as specified in the following two paragraphs) thereafter be
entitled to receive solely the Purchase Price or Change in Control Purchase
Price, as the case may be, with respect to such Security. Such Purchase Price or
Change in Control Purchase Price shall be paid to such Holder, subject to
receipts of funds and/or securities by the Paying Agent, promptly following the
later of (x) the Purchase Date or the Change in Control Purchase Date, as the
case may be, with respect to such Security (provided the conditions in Section
5.7(d) or Section 5.8(c), as applicable, have been satisfied) and (y) the time
of delivery of such Security to the Paying Agent by the Holder thereof in the
manner required by Section 5.7(d) or Section 5.8(c), as applicable. Securities
in respect of which a Purchase Notice or Change in Control Purchase Notice has
been given by the Holder thereof may not be converted pursuant to Article XII
hereof on or after the date of the delivery of such Purchase Notice or Change in
Control Purchase Notice unless such Purchase Notice or Change in Control
Purchase Notice has first been validly withdrawn as specified in the following
two paragraphs.
A Purchase Notice or Change in Control Purchase Notice may be
withdrawn by means of a written notice of withdrawal delivered to the office of
the Paying Agent in accordance with the Purchase Notice or Change in Control
Purchase Notice, as the case may be, at any time prior to the close of business
on the last day prior to the Purchase Date or the Change in Control Purchase
Date, as the case may be, specifying:
40
(1) the certificate number of the Security in respect of
which such notice of withdrawal is being submitted or, if
the Security is not certificated, the notice must comply
with the appropriate Depositary procedures;
(2) the principal amount at maturity of the Security with
respect to which such notice of withdrawal is being
submitted, and
(3) the principal amount at maturity, if any, of such
Security which remains subject to the original Purchase
Notice or Change in Control Purchase Notice, as the case
may be, and which has been or will be delivered for
purchase by the Company.
A written notice of withdrawal of a Purchase Notice may be in
the form set forth in the preceding paragraph or may be in the form of (i) a
conditional withdrawal contained in a Purchase Notice pursuant to the terms of
Section 5.7(a)(1)(D) or (ii) a conditional withdrawal containing the information
set forth in Section 5.7(a)(1)(D) and the preceding paragraph and contained in a
written notice of withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.
Section 5.10 DEPOSIT OF PURCHASE PRICE OR CHANGE IN CONTROL
PURCHASE PRICE. Prior to 10:00 a.m. New York City time on the Business Day
following the Purchase Date or the Change in Control Purchase Date, as the case
may be, the Company shall deposit with the Trustee or with the Paying Agent (or,
if the Company or a Subsidiary or an Affiliate of either of them is acting as
the Paying Agent, shall segregate and hold in trust as provided in Section 2.4)
an amount of cash (in immediately available funds if deposited on such Business
Day) and/or Ordinary Shares, if permitted hereunder, sufficient to pay the
aggregate Purchase Price or Change in Control Purchase Price, as the case may
be, of all the Securities or portions thereof which are to be purchased as of
the Purchase Date or Change in Control Purchase Date, as the case may be.
Section 5.11 SECURITIES PURCHASED IN PART. Any Certificated
Security which is to be purchased only in part shall be surrendered at the
office of the Paying Agent (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing) and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security, without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder in aggregate principal amount at maturity equal to, and
in exchange for, the portion of the principal amount at maturity of the Security
so surrendered which is not purchased.
Section 5.12 COVENANT TO COMPLY WITH SECURITIES LAWS UPON
PURCHASE OF SECURITIES. When complying with the provisions of Section 5.7 or 5.8
hereof (provided that such offer or purchase constitutes an "issuer tender
offer" for purposes of Rule 13e-4 (which term, as used herein, includes any
successor provision thereto) under the Exchange Act at the time of such offer or
purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 (or any
successor provision) under the Exchange Act, (ii) file the related Schedule TO
(or any successor schedule, form or report) under the Exchange Act, and (iii)
otherwise comply with any
41
applicable Federal and state securities laws so as to permit the rights and
obligations under Sections 5.7 and 5.8 to be exercised in the time and in the
manner specified in Sections 5.7 and 5.8.
Section 5.13 REPAYMENT TO THE COMPANY. The Trustee and the
Paying Agent shall return to the Company any cash or Ordinary Shares that remain
unclaimed as provided in Paragraph 14 of the Securities, together with interest
or dividends, if any, thereon (subject to the provisions of Section 9.1(f)),
held by them for the payment of the Purchase Price or Change in Control Purchase
Price, as the case may be; provided, however, that to the extent that the
aggregate amount of cash or Ordinary Shares deposited by the Company pursuant to
Section 5.10 exceeds the aggregate Purchase Price or Change in Control Purchase
Price, as the case may be, of the Securities or portions thereof which the
Company is obligated to purchase as of the Purchase Date or Change in Control
Purchase Date, as the case may be, then, unless otherwise agreed in writing with
the Company, promptly after the Business Day following the Purchase Date or
Change in Control Purchase Date, as the case may be, the Trustee shall return
any such excess to the Company together with interest or dividends, if any,
thereon (subject to the provisions of Section 9.1(f)).
ARTICLE VI
COVENANTS
Section 6.1 PAYMENT OF SECURITIES. The Company shall promptly
make all payments in respect of the Securities including, without limitation,
any Contingent Cash Interest, Additional Amounts and any Liquidated Damages, on
the dates and in the manner provided in the Securities or pursuant to this
Indenture or the Registration Rights Agreement. Any amounts of cash or Ordinary
Shares to be given to the Trustee or Paying Agent, shall be deposited with the
Trustee or Paying Agent by 10:00 a.m. New York City time by the Company on the
required date. The Company may, at its option, make payments in respect of the
Securities by check mailed to a Holder's registered address or, with respect to
global Securities, by wire transfer. The Company shall make any required
payments of Contingent Cash Interest, Additional Amounts and Liquidated Damages
to the person in whose name each Security is registered at the close of business
on the record date for such interest payment. The principal amount, Accreted
Value, accrued Contingent Cash Interest, if any, Redemption Price, Purchase
Price, Change in Control Purchase Price, Liquidated Damages, if any, and
Additional Amounts, if any, shall be considered paid on the applicable date due
if on such date (or, in the case of a Purchase Price or Change in Control
Purchase Price, on the Business Day following the applicable Purchase Date or
Change in Control Purchase Date, as the case may be) the Trustee or the Paying
Agent holds, in accordance with this Indenture, cash or securities, if permitted
hereunder, sufficient to pay all such amounts then due.
Section 6.2 SEC AND OTHER REPORTS. The Company shall file with
the Trustee, within 15 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time
no longer subject to the
42
reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall
continue to provide the Trustee with annual and quarterly reports containing
substantially the same information as would have been required to be filed with
the SEC had the Company continued to have been subject to such reporting
requirements. In such event, such annual and quarterly reports shall be provided
at the times the Company would have been required to provide reports had it
continued to have been subject to such reporting requirements. The Company also
shall comply with the other provisions of TIA Section 314(a). Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely conclusively on Officers'
Certificates).
Section 6.3 COMPLIANCE CERTIFICATE. The Company shall deliver
to the Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2001) an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof, the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and if the Company
shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.
Section 6.4 FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
Section 6.5 MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in the Borough of Manhattan, the City of New York, an office or agency
of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities
may be presented or surrendered for payment, where Securities may be surrendered
for registration of transfer, exchange, purchase, redemption or conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The office of State Street Bank and Trust
Company, N.A., an affiliate of the Trustee, at 61 Broadway, 15th floor, New
York, NY 10022 (Attention: Corporate Trust Trustee Administration: XL Capital
Ltd Liquid Yield Option(TM) Notes due 2021), shall initially be such office or
agency for all of the aforesaid purposes. The Company shall give prompt written
notice to the Trustee of the location, and of any change in the location, of any
such office or agency (other than a change in the location of the Corporate
Trust Office of the Trustee). If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 13.2.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York, for such purposes.
43
Section 6.6 DELIVERY OF CERTAIN INFORMATION. At any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder or any beneficial owner of Securities or holder or
beneficial owner of Ordinary Shares issued upon conversion thereof, or in
accordance with Section 5.8(c), the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder or any
beneficial owner of Securities or holder or beneficial owner of Ordinary Shares,
or to a prospective purchaser of any such security designated by any such
holder, as the case may be, to the extent required to permit compliance by such
Holder or holder with Rule 144A under the Securities Act in connection with the
resale of any such security. "Rule 144A Information" shall be such information
as is specified pursuant to Rule 144A(d)(4) under the Securities Act. Whether a
person is a beneficial owner shall be determined by the Company to the Company's
reasonable satisfaction.
Section 6.7 ADDITIONAL AMOUNTS.
All amounts payable (whether in respect of principal, interest
or otherwise) in respect of the Securities will be made free and clear of and
without withholding or deduction for or on account of any present or future
taxes, duties, levies, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the Cayman Islands or any political
subdivision thereof or any authority or agency therein or thereof having power
to tax, unless the withholding or deduction of such taxes, duties, levies,
assessments or governmental charges is required by law. In that event, the
Company will pay, or cause to be paid, such Additional Amounts as may be
necessary in order that the net amounts receivable by a Holder after such
withholding or deduction shall equal the respective amounts that would have been
receivable by such Holder had no such withholding or deduction been required,
except that no such Additional Amounts shall be payable in relation to any
payment in respect of any of the Securities (a) to, or to a third party on
behalf of, a person who is liable for such taxes, duties, levies, assessments or
governmental charges in respect of such Security by reason of his having some
connection with (including, without limitation, being a citizen of, being
incorporated or engaged in a trade or business in, or having a residence or
principal place of business or other presence in) the Cayman Islands other than
(i) the mere holding of such Security or (ii) the receipt of principal,
Contingent Cash Interest, Liquidated Damages or other amount in respect of such
Security; (b) presented for payment more than 30 days after the Relevant Date,
except to the extent that the relevant Holder would have been entitled to such
Additional Amounts on presenting the same for payment on or before the expiry of
such period of 30 days; (c) on account of any inheritance, gift, estate,
personal property, sales or transfer or similar taxes, duties, levies,
assessments or similar governmental charges; or (d) on account of any taxes,
duties, levies, assessments or governmental charges that are payable otherwise
than by withholding from payments in respect of such Security.
If the Company becomes subject generally at any time to
any taxing jurisdiction other than or in addition to the Cayman Islands,
references in this section to the Cayman Islands shall be read and construed as
references to such other jurisdiction(s) and/or to the Cayman Islands.
Notwithstanding anything herein to the contrary, in the
event that any deduction or withholding on account of tax be required to be
made, or be made, in connection
44
with any European Union directive on the taxation of savings implementing the
conclusions of the ECOFIN Council meeting of November 26-27, 2000, or any law
implementing or complying with, or introduced in order to conform to, such
directive, no additional amounts shall be payable or paid by the Company to any
holder in respect of the Securities.
Any reference in this Indenture to principal, premium or
interest in respect of the Securities, any redemption amount and any other
amounts in the nature of principal, shall be deemed also to refer to any
Additional Amounts that may be payable under this Indenture, and the express
mention of the payment of Additional Amounts (if applicable) in any provision
hereof shall not be construed as excluding Additional Amounts in those provision
hereof where such express mention is not made.
Except as otherwise provided in or pursuant to this
Indenture, if the Securities require the payment of Additional Amounts, at least
10 days prior to the first Relevant Date with respect to such Securities, and at
least 10 days prior to each Relevant Date if there has been any change with
respect to the matters set forth in the below-mentioned Officers' Certificate,
the Company or its designee shall furnish to the Trustee, the Registrar and the
Paying Agent an Officer's Certificate instructing the Trustee and such Paying
Agents whether such payment of principal of or interest on the Securities shall
be made to Holders who are Non-U.S. Persons without withholding for or on
account of any tax assessment or other governmental charge described above due
to the payment of Additional Amounts by the Company. If any such payment of
Additional Amounts shall be required, then such certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
Holders, and the Company agrees to pay to the Trustee, the Registrar or the
Paying Agent the Additional Amounts required.
ARTICLE VII
SUCCESSOR CORPORATION
Section 7.1 WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The
Company shall not (1) consolidate with or merge with or into any other person
(other than a Subsidiary) or convey, transfer, sell or lease its properties and
assets substantially as an entirety to any person (other than a Subsidiary), (2)
permit any person (other than a Subsidiary) to consolidate with or merge into
the Company, or (3) permit any person (other than a Subsidiary) to convey,
transfer, sell or lease that person's properties and assets substantially as an
entirety to the Company, unless:
(a) in the case of (1) and (2) above, if the Company is not
the surviving person, the surviving person expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, the payment of the principal (including Contingent
Additional Principal, if any) of, premium, if any, and Contingent Cash Interest
on the LYONs and all of the obligations of the Company under the Securities and
this Indenture;
(b) in all cases, immediately after giving effect to such
transaction, no Event of Default, and no event that, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing; and
45
(c) the Company shall have delivered to the Trustee an
Officers' Certificate stating that such consolidation, merger, conveyance,
transfer, sale or lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply with this
Article VII and that all conditions precedent herein provided for relating to
such transaction have been satisfied.
The successor person formed by such consolidation or into
which the Company is merged or the successor person to which such conveyance,
transfer, sale or lease is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture with the
same effect as if such successor had been named as the Company herein; and
thereafter, except in the case of a lease and obligations the Company may have
under a supplemental indenture pursuant to Section 12.15, the Company shall be
discharged from all obligations and covenants under this Indenture and the
Securities. Subject to Section 11.6, the Company, the Trustee and the successor
person shall enter into a supplemental indenture to evidence the succession and
substitution of such successor person and such discharge and release of the
Company.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.1 EVENTS OF DEFAULT. An "Event of Default" occurs
if:
(1) the Company defaults in the payment of the Accreted Value at
maturity, upon redemption, repurchase or following a Change in Control, or any
Additional Amounts in respect thereof, in each case when the same becomes due
and payable;
(2) the Company defaults in the payment of any Contingent Cash
Interest, Additional Amounts or Liquidated Damages when due and payable, and
continuance of such default for a period of 30 days;
(3) the Company fails to comply with any of its agreements or covenants
in the Securities or this Indenture (other than those referred to in clause (1)
or (2) above) and such failure continues for 60 days after receipt by the
Company of a Notice of Default;
(4) there shall have occurred either (i) a default by the Company under
any instrument or instruments under which there is or may be secured or
evidenced any Indebtedness of the Company (other than the Securities) having an
outstanding principal amount of $50,000,000 (or its foreign currency equivalent)
or more, individually or in the aggregate, that has caused the holders thereof
to declare such Indebtedness to be due and payable prior to its stated maturity,
unless such declaration has been rescinded within 30 days or (ii) a default by
the Company in the payment when due of the principal or premium, if any, of any
bond, debenture, note or other evidence of the Company's Indebtedness, in each
case for money borrowed, or in the payment of principal or premium under any
mortgage, indenture, agreement or instrument of the Company under which there
may be issued or by which there may be secured or evidenced any
46
Indebtedness of the Company for money borrowed, which default for payment of
principal or premium, if any, is in an aggregate principal amount exceeding
$50,000,000 (or its foreign currency equivalent) when such Indebtedness becomes
due and payable (whether at maturity, upon redemption or acceleration or
otherwise), if such default shall continue unremedied or unwaived for more than
30 Business Days after the expiration of any grace period or extension of the
time for payment applicable thereto;
(5) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or for any substantial part of
its property or ordering the winding up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(6) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar official)
of the Company or for any substantial part of its property or make any general
assignment for the benefit of creditors.
A Default under clause (3) above is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the Securities at the time outstanding notify the
Company and the Trustee, of the Default and the Company does not cure such
Default (and such Default is not waived) within the time specified in clause (3)
above after actual receipt of such notice. Any such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
The Company shall deliver to the Trustee, within 30 days after
it becomes aware of the occurrence thereof, written notice of any event which
with the giving of notice or the lapse of time, or both, would mature into an
Event of Default under clauses (3) or (4) above, its status and what action the
Company is taking or proposes to take with respect thereto.
Section 8.2 ACCELERATION. If an Event of Default (other than
an Event of Default specified in Section 8.1(5) or (6)) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in aggregate principal amount of the Securities at the time outstanding by
notice to the Company and the Trustee, may declare the Accreted Value plus
accrued and unpaid Contingent Cash Interest, if any, on all the Securities to be
immediately due and payable. Upon such a declaration, such accelerated amount
shall be due and payable immediately. If an Event of Default specified in
Section 8.1(5) or (6) occurs and is continuing, the Accreted Value plus accrued
and unpaid Contingent Cash Interest, if any, on all the Securities shall become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. The Holders of a majority in aggregate
principal amount of the Securities at the time outstanding, by notice to the
Trustee (and without notice to any other Security holder) may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of the Accreted Value plus accrued and unpaid
Contingent
47
Cash Interest, if any, that have become due solely as a result of acceleration
and if all amounts due to the Trustee under Section 9.7 have been paid. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
Section 8.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of the Accreted Value
plus accrued and unpaid Contingent Cash Interest, if any, on the Securities or
to enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does
not possess any of the Securities or does not produce any of the Securities in
the proceeding. A delay or omission by the Trustee or any Security holder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
Section 8.4 WAIVER OF PAST DEFAULTS The Holders of a majority
in aggregate principal amount of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other Securityholder), may
waive an existing Default and its consequences except (1) an Event of Default
described in Section 8.1(1) or (2), (2) a Default in respect of a provision that
under Section 11.2 cannot be amended without the consent of each Securityholder
affected or (3) a Default which constitutes a failure to convert any Security in
accordance with the terms of Article XII. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right. This Section 8.4 shall be in lieu of Section
316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
Section 8.5 CONTROL BY MAJORITY. The Holders of a majority in
aggregate principal amount of the Securities at the time outstanding may direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or that the Trustee determines in good faith is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability unless the Trustee is offered indemnity satisfactory to
it. This Section 8.5 shall be in lieu of Section 316(a)1(A) of the TIA and such
Section 316(a)1(A) is hereby expressly excluded from this Indenture, as
permitted by the TIA.
Section 8.6 LIMITATION ON SUITS. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount at
maturity of the Securities at the time outstanding make a written request to the
Trustee to pursue the remedy;
48
(3) such Holder or Holders offer to the Trustee security or indemnity
satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of such notice, request and offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount at maturity
of the Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of any other Securityholder or to obtain a preference or priority over
any other Securityholder.
Section 8.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of the Accreted Value , Redemption Price, Purchase Price,
Change in Control Purchase Price, Additional Amounts, Liquidated Damages or
Contingent Cash Interest, if any, in respect of the Securities held by such
Holder, on or after the respective due dates expressed in the Securities or any
Redemption Date, and to convert the Securities in accordance with Article XII,
or to bring suit for the enforcement of any such payment on or after such
respective dates or the right to convert, shall not be impaired or affected
adversely without the consent of such Holder.
Section 8.8 COLLECTION SUIT BY TRUSTEE. If an Event of Default
described in Section 8.1(1) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount then owing with respect to the Securities and the amounts
provided for in Section 9.7.
Section 8.9 TRUSTEE MAY FILE PROOFS OF CLAIM.In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the Accreted Value, Redemption Price, Purchase
Price, Change in Control Purchase Price, Additional Amounts, Liquidated Damages
or Contingent Cash Interest, if any, in respect of the Securities shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of any such amount) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the
Accreted Value, Redemption Price, Purchase Price, Change in Control Purchase
Price, Additional Amounts, Liquidated Damages or Contingent Cash Interest, if
any, and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel or any other amounts due the Trustee under Section 9.7)
and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee,
49
liquidator, sequestrator or similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 9.7.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 8.10 PRIORITIES. If the Trustee collects any money
pursuant to this Article VIII, it shall pay out the money in the following
order:
FIRST: to the Trustee for amounts due under Section 9.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for the Accreted Value, Redemption Price, Purchase Price, Change in
Control Purchase Price, Additional Amounts, Liquidated Damages or Contingent
Cash Interest, if any, as the case may be, ratably, without preference or
priority of any kind, according to such amounts due and payable on the
Securities; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section 8.10. At least 15 days
before such record date, the Trustee shall mail to each Securityholder and the
Company a notice that states the record date, the payment date and the amount to
be paid.
Section 8.11 UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant (other than the Trustee)
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 8.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 8.7 or a suit by Holders of more than 10% in aggregate
principal amount of the Securities at the time outstanding. This Section 8.11
shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby
expressly excluded from this Indenture, as permitted by the TIA.
Section 8.12 WAIVER OF STAY, EXTENSION OR USURY LAWS. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Accreted Value,
Redemption Price, Purchase Price, Change in Control Purchase Price, Additional
Amounts, Liquidated Damages or Contingent Cash Interest, if any, as contemplated
herein, or
50
which may affect the covenants or the performance of this Indenture; and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE IX
TRUSTEE
Section 9.1 DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others;
and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture, but in
case of any such certificates or opinions which by any
provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not
they conform to the requirements of this Indenture, but
need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein.
This Section 9.1(b) shall be in lieu of Section 5.15(a)
of the TIA and such Section 315(a) is hereby expressly
excluded from this Indenture, as permitted by the TIA.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 9.1;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 8.5.
51
Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1),
315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and
315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the
TIA.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section
9.1.
(e) The Trustee may refuse to perform any duty or exercise any
right or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) Money or Ordinary Shares held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee (acting in any capacity hereunder) shall be under no
liability for interest on any money received by it hereunder unless otherwise
agreed in writing with the Company.
Section 9.2 RIGHTS OF TRUSTEE. Subject to its duties and
responsibilities under the TIA,
(a) the Trustee may conclusively rely and shall be protected
in acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, conclusively rely upon an Officers' Certificate;
(c) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(d) The Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith which it believes to be
authorized or within its rights or powers conferred under this Indenture;
(e) The Trustee may consult with counsel selected by it and
any advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel.
(f) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or
52
indemnity satisfactory to it against the costs, expenses and liabilities which
may be incurred therein or thereby.
(g) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Order and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution;
(h) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney at the sole cost of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or investigation;
(i) the Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Trustee has
actual knowledge thereof or unless written notice of any event which is in fact
such a default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Securities and this Indenture;
(j) the rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other person
employed to act hereunder; and
(k) the Trustee may request that the Company deliver an
Officers' Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to this
Indenture, which Officers' Certificate may be signed by any person authorized to
sign an Officers' Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded.
Section 9.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or any of its Affiliates with the same
rights it would have if it were not Trustee. Any Paying Agent, Registrar,
Conversion Agent or co-registrar may do the same with like rights. However, the
Trustee must comply with Sections 9.10 and 9.11.
Section 9.4 TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use or application of
the proceeds from the Securities, it shall not be responsible for any statement
in the registration statement for the Securities under the Securities Act or in
any offering document for the Securities, the Indenture or the Securities (other
than its certificate of authentication), or the determination as to which
beneficial owners are entitled to receive any notices hereunder.
53
Section 9.5 NOTICE OF DEFAULTS. If a Default occurs and if it
is known to the Trustee, the Trustee shall give to each Securityholder notice of
the Default within 90 days after it occurs or, if later, within 15 days after it
is known to the Trustee, unless such Default shall have been cured or waived
before the giving of such notice. Notwithstanding the preceding sentence, except
in the case of a Default described in Section 8.1(1) or (2), the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Securityholders. The second sentence of this Section 9.5 shall be in lieu of the
proviso to Section 315(b) of the TIA and such proviso is hereby expressly
excluded from this Indenture, as permitted by the TIA. The Trustee shall not be
deemed to have knowledge of a Default unless a Responsible Officer of the
Trustee has received written notice of such Default.
Section 9.6 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days
after each May 15 beginning with the May 15 following the date of this
Indenture, the Trustee shall mail to each Securityholder a brief report dated as
of such May 15 that complies with TIA Section 313(a), if required by such
Section 313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each securities exchange, if
any, on which the Securities are listed. The Company agrees to notify the
Trustee promptly whenever the Securities become listed on any securities
exchange and of any delisting thereof.
Section 9.7 COMPENSATION AND INDEMNITY. The Company agrees:
(a) to pay to the Trustee from time to time such compensation
as the Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited (to
the extent permitted by law) by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any provision of this Indenture (including the reasonable
compensation and the expenses, advances and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee or any predecessor, Trustee and
their agents for, and to hold them harmless against, any loss, damage, claim,
liability, cost or expense (including attorney's fees and expenses, and taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee)) incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim (whether asserted
by the Company or any Holder or any other person) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
To secure the Company's payment obligations in this Section
9.7, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, except that held in trust to pay the
principal amount, Accreted Value, Redemption Price,
54
Purchase Price, Change in Control Purchase Price, Additional Amounts, Liquidated
Damages or Contingent Cash Interest, if any, as the case may be, on particular
Securities.
The Company's payment obligations pursuant to this Section 9.7
shall survive the discharge of this Indenture and the resignation or removal of
the Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 8.1(5) or (6), the expenses including the reasonable
charges and expenses of its counsel, are intended to constitute expenses of
administration under any bankruptcy law.
Section 9.8 REPLACEMENT OF TRUSTEE. The Trustee may resign by
so notifying the Company; provided, however, no such resignation shall be
effective until a successor Trustee has accepted its appointment pursuant to
this Section 9.8. The Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may remove the Trustee by so notifying the
Trustee and the Company. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 9.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company satisfactory in form and
substance to the retiring Trustee and the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 9.7.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may petition any court of competent
jurisdiction at the expense of the Company for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Section 9.9 SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets (including the administration of the
trust created by this Indenture) to, another corporation, the
55
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
Section 9.10 ELIGIBILITY; DISQUALIFICATION. The Trustee shall
at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The
Trustee (or its parent holding company) shall have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition. Nothing herein contained shall prevent the Trustee from
filing with the SEC the application referred to in the penultimate paragraph of
TIA Section 310(b).
Section 9.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE X
DISCHARGE OF INDENTURE
Section 10.1 DISCHARGE OF LIABILITY ON SECURITIES. When (i)
the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced or repaid pursuant to Section 2.7) for cancellation or (ii)
all outstanding Securities have become due and payable and the Company deposits
with the Trustee cash or Ordinary Shares sufficient to pay all amounts due and
owing on all outstanding Securities (other than Securities replaced pursuant to
Section 2.7), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Section 9.7,
cease to be of further effect. The Trustee shall join in the execution of a
document prepared by the Company acknowledging satisfaction and discharge of
this Indenture on demand of the Company accompanied by an Officers' Certificate
and Opinion of Counsel and at the cost and expense of the Company.
Section 10.2 REPAYMENT TO THE COMPANY. The Trustee and the
Paying Agent shall return to the Company upon written request any money or
securities held by them for the payment of any amount with respect to the
Securities that remains unclaimed for two years, subject to applicable unclaimed
property law. After return to the Company, Holders entitled to the money or
securities must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and the Trustee and
the Paying Agent shall have no further liability to the Securityholders with
respect to such money or securities for that period commencing after the return
thereof.
ARTICLE XI
AMENDMENTS
Section 11.1 WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
56
(2) to make any modifications or amendments that do not, in the good
faith opinion of the Company's Board of Directors and the Trustee, adversely
affect the interests of the holders of the Securities in any material respect;
(3) to provide for the assumption of the Company's obligations under
this Indenture by a successor upon any merger, consolidation or asset transfer
as permitted by and in compliance with Article VII or Section 12.15;
(4) to provide any security for or guarantees of the Securities;
(5) to add Events of Default with respect to the Securities;
(6) to add to the Company's covenants for the benefit of the
Securityholders or to surrender any right or power conferred upon the Company by
this Indenture;
(7) to make any change necessary for the registration of the Securities
under the Securities Act or to comply with the TIA, or any amendment thereto, or
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the TIA, provided that such modification or amendment
does not, in the good faith opinion of the Company's Board of Directors and the
Trustee, adversely affect the interests of the holders of the Securities in any
material respect; or
(8) to provide for uncertificated Securities in addition to or in place
of certificated Securities or to provide for bearer Securities.
Section 11.2 WITH CONSENT OF HOLDERS. With the written consent
of the Holders of at least a majority in aggregate principal amount of the
Securities at the time outstanding, the Company and the Trustee may amend or
supplement this Indenture or the Securities. However, without the consent of
each Securityholder affected, an amendment to this Indenture or the Securities
may not:
(1) reduce the rate or accrual of original issue discount referred to
in paragraph 1 of the Securities or change the time for payment of interest
thereon;
(2) reduce the principal amount at maturity or the Accreted Value of or
extend the Stated Maturity of any Security;
(3) reduce the calculation of the value of the Ordinary Shares to which
reference is made in determining whether Contingent Additional Principal or
Contingent Cash Interest will be due on the Securities;
(4) reduce the Redemption Price, Purchase Price, Change in Control
Purchase Price, Contingent Additional Principal, Original Issue Discount or
Contingent Cash Interest of any Security or change the time at which the
Securities may be redeemed or repurchased;
(5) make any payments on the Securities payable in currency other than
as stated in the Security;
57
(6) make any change in the percentage of principal amount of Securities
necessary to waive compliance with the provisions of Section 8.4 or this Section
11.2, except to increase any percentage set forth therein;
(7) make any change that in the good faith judgment of the Company's
Board of Directors and the Trustee adversely affects the right to convert any
Security in accordance with the terms thereof and this Indenture;
(8) make any change that in the good faith judgment of the Company's
Board of Directors and the Trustee adversely affects the right to require the
Company to purchase the Securities in accordance with the terms thereof and this
Indenture;
(9) impair a Holder's right to institute suit for the enforcement of
any payment on the Securities; or
(10) waive a continuing default or Event of Default regarding any
payment on the Securities.
It shall not be necessary for the consent of the Holders under
this Section 11.2 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 11.2 becomes effective,
the Company shall mail to each Holder a notice briefly describing the amendment.
Section 11.3 COMPLIANCE WITH TRUST INDENTURE ACT. Every
supplemental indenture executed pursuant to this Article shall comply with the
TIA.
Section 11.4 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND
ACTIONS. Until an amendment, waiver or other action by Holders becomes
effective, a consent thereto by a Holder of a Security hereunder is a continuing
consent by the Holder and every subsequent Holder of that Security or portion of
the Security that evidences the same obligation as the consenting Holder's
Security, even if notation of the consent, waiver or action is not made on the
Security. However, any such Holder or subsequent Holder may revoke the consent,
waiver or action as to such Holder's Security or portion of the Security if the
Trustee receives the notice of revocation before the date the amendment, waiver
or action becomes effective. After an amendment, waiver or action becomes
effective, it shall bind every Securityholder.
Section 11.5 NOTATION ON OR EXCHANGE OF SECURITIES. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.
Section 11.6 TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The
Trustee shall sign any supplemental indenture authorized pursuant to this
Article XI if the amendment contained
58
therein does not adversely affect the rights, duties, liabilities or immunities
of the Trustee. If it does, the Trustee may, but need not, sign such
supplemental indenture. In signing such supplemental indenture the Trustee shall
receive, and (subject to the provisions of Section 9.1) shall be fully protected
in relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture.
Section 11.7 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
ARTICLE XII
CONVERSIONS
Section 12.1 CONVERSION PRIVILEGE. A Holder of a Security may
convert such Security into Ordinary Shares at any time during the period stated
in Paragraph 10 of the Securities. The number of Ordinary Shares issuable upon
conversion of a Security per $1,000 of principal amount at maturity thereof (the
"Conversion Rate") shall be that set forth in Paragraph 10 of the Securities,
subject to adjustment as herein set forth. The Company shall notify the Trustee
of the date on which the Securities first become convertible, which certificate
shall set forth the calculations on which such determination was made. Unless
and until the Trustee receives such certificate, the Trustee may assume without
inquiry that the Securities are not convertible.
A Holder may convert a portion of the principal amount at
maturity of a Security if the portion converted is in a $1,000 principal amount
at maturity or an integral multiple of $1,000. Provisions of this Indenture that
apply to conversion of all of a Security also apply to conversion of a portion
of a Security.
In the event that the Ex-Dividend Time (as defined below) (or
in the case of a subdivision, combination or reclassification, the effective
date with respect thereto) with respect to a dividend, subdivision, combination
or reclassification to which Section 12.6(1), (2), (3) or (5) applies occurs
during the period applicable for calculating "Average Sale Price" pursuant to
the definition in the preceding sentence, "Average Sale Price" shall be
calculated for such period in a manner determined by the Board of Directors to
reflect the impact of such dividend, subdivision, combination or
reclassification on the Sale Price of the Ordinary Shares during such period.
"Time of Determination" means the time and date of the earlier
of (i) the determination of stockholders entitled to receive rights, warrants or
options or a distribution, in each case, to which Section 12.7 or 12.8 applies
and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or options or distribution on
the NYSE or such other U.S. national or regional exchange or market on which the
Ordinary Shares are then listed or quoted.
59
Section 12.2 CONVERSION PROCEDURE. To convert a Security a
Holder must satisfy the requirements in Paragraph 10 of the Securities. The
first Business Day on which the Holder satisfies all those requirements and
submits such Holder's Securities for conversion is the conversion date (the
"Conversion Date").
As soon as practicable after the Conversion Date, the Company
shall deliver to the Holder, through the Conversion Agent, a certificate in
global form for the number of full Ordinary Shares issuable upon the conversion
or exchange and cash in lieu of any fractional share determined pursuant to
Section 12.3. The person in whose name the certificate is registered shall be
treated as a shareholder of record as of the close of business on the Conversion
Date. Upon conversion of a Security in its entirety, such person shall no longer
be a Holder of such Security.
No payment or adjustment will be made for dividends on, or
other distributions with respect to, any Ordinary Shares except as provided in
this Article XII. On conversion of a Security, that portion of accrued and
unpaid Contingent Cash Interest, if any, through the Conversion Date with
respect to the converted Security shall not be cancelled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through delivery of the Ordinary Shares (together with the cash payment, if any,
in lieu of fractional shares) for the Security being converted pursuant to the
provisions hereof; and the fair market value of such Ordinary Shares (together
with any such cash payment in lieu of fractional shares) shall be treated as
issued, to the extent thereof, first in exchange for accrued and unpaid
Contingent Cash Interest, if any, through the Conversion Date, and the balance,
if any, of such fair market value of such Ordinary Shares (and any such cash
payment) shall be treated as issued for the Accreted Value of the Security being
converted pursuant to the provisions hereof. The Company will not adjust the
conversion ratio to account for accrued interest, if any. If the Holder converts
more than one Security at the same time, the number of Ordinary Shares issuable
upon the conversion shall be based on the total Accreted Value of the Securities
converted.
If the last day on which a Security may be converted is a
Legal Holiday, the Security may be surrendered on the next succeeding day that
is not a Legal Holiday.
Upon surrender of a Security that is converted in part, the
Company shall execute, and the Trustee shall authenticate and deliver to the
Holder, a new Security in an authorized denomination equal in principal amount
to the unconverted portion of the Security surrendered.
Section 12.3 FRACTIONAL SHARES. The Company will not issue
fractional Ordinary Shares upon conversion of a Security. Instead, the Company
will pay cash based on the current Market Price for all fractional shares. The
current market value of a fractional share shall be determined, to the nearest
1/1,000th of a share, by multiplying the Market Price of a full Ordinary Share
by the fractional amount and rounding the product to the nearest whole cent. It
is understood that if a Holder elects to have more than one Security converted,
the number of Ordinary Shares shall be based on the Accreted Value of Securities
to be purchased.
Section 12.4 TAXES ON CONVERSION. If a Holder submits a
Security for conversion, the Company shall pay all stamp and all other duties,
if any, which may be imposed by the United States or any political subdivision
thereof or taxing authority thereof or therein
60
with respect to the issuance of Ordinary Shares upon the conversion. However,
the Holder shall pay any such tax which is due because the Holder requests the
shares to be issued in a name other than the Holder's name. The Conversion Agent
may refuse to deliver the certificates representing the Ordinary Shares being
issued in a name other than the Holder's name until the Conversion Agent
receives a sum sufficient to pay any tax which will be due because the shares
are to be issued in a name other than the Holder's name. Nothing herein shall
preclude any tax withholding required by law or regulations.
Section 12.5 COMPANY TO PROVIDE STOCK. The Company shall,
prior to issuance of any Securities under this Article XII, and from time to
time as may be necessary, reserve out of its authorized but unissued Ordinary
Shares a sufficient number of Ordinary Shares to permit the conversion of the
Securities.
All Ordinary Shares delivered upon conversion of the
Securities shall be newly issued shares or treasury shares, shall be duly
authorized, validly issued and fully paid and nonassessable, and shall be free
from preemptive rights and free of any lien or adverse claim. The Company will
endeavor promptly to comply with all federal and state securities laws
regulating the offer and delivery of Ordinary Shares upon conversion of
Securities, if any, and will list or cause to have quoted such Ordinary Shares
on each national securities exchange or in the over-the-counter market or such
other market on which the Ordinary Shares are then listed or quoted.
Section 12.6 ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after
the Issue Date of the Securities, the Company, or in the case of (4) below, any
Subsidiary of the Company:
(1) pays a dividend or makes another distribution to all
holders of the Company's Ordinary Shares payable exclusively in Ordinary Shares
on the Company's Ordinary Shares;
(2) subdivides the outstanding Ordinary Shares into a greater number of
shares;
(3) combines the outstanding Ordinary Shares into a smaller number of
shares; or
(4) pays a dividend or makes another distribution to all holders of the
Company's Ordinary Shares consisting of the Company's debt, securities or assets
or certain rights to purchase the Company's securities (other than Ordinary
Shares or rights, warrants or options referred to in Section 12.7 and dividends
and other distributions paid exclusively in cash),
then the conversion privilege and the Conversion Rate in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares of Capital Stock of the
Company which such Holder would have owned immediately following such action if
such Holder had converted the Security immediately prior to such action;
provided, however, that no adjustment shall be made pursuant to clause (4) if
all the Holders of the Securities may participate.
The adjustment shall become effective immediately after the
record date in the case of a dividend, distribution or subdivision and
immediately after the effective date in the case of a combination or
reclassification.
61
If after an adjustment a Holder of a Security upon conversion
of such Security may receive shares of two or more classes of Capital Stock of
the Company, the Conversion Rate shall thereafter be subject to adjustment upon
the occurrence of an action taken with respect to any such class of Capital
Stock as is contemplated by this Article XII with respect to the Ordinary
Shares, on terms comparable to those applicable to Ordinary Shares in this
Article XII.
Section 12.7 ADJUSTMENT FOR RIGHTS ISSUE. If after the Issue
Date of the Securities, the Company distributes any rights or warrants to all
holders of the Company's Ordinary Shares entitling them to purchase, for a
period expiring within 60 days, Ordinary Shares at a price per share less than
the then current Market Price as of the Time of Determination (except that no
adjustment will be made if Holders of the Securities may participate in the
distribution on a basis and with the notice that the Company's Board of
Directors determines to be fair and appropriate), the Conversion Rate shall be
adjusted in accordance with the formula:
R' = R x (O + N)
-------------
(O + (N x P)/M)
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
O = the number of Ordinary Shares outstanding on the record date for
the distribution to which this Section 12.7 is being applied.
N = the number of additional Ordinary Shares offered pursuant to the
distribution.
P = the offering price per share of the additional shares.
M = the Market Price, minus, in the case of (i) a distribution to which
Section 12.6(4) applies or (ii) a distribution to which Section 12.8 applies,
for which, in each case, (x) the record date shall occur on or before the record
date for the distribution to which this Section 12.7 applies and (y) the
Ex-Dividend Time shall occur on or after the date of the Time of Determination
for the distribution to which this Section 12.7 applies, the fair market value
(on the record date for the distribution to which this Section 12.7 applies) of
the
(1) Capital Stock of the Company distributed in respect of each
Ordinary Share in such Section 12.6(4) distribution and
(2) the Company's debt, securities or assets or certain rights,
warrants or options to purchase securities of the Company distributed in respect
of each Ordinary Share in such Section 12.8 distribution.
The Board of Directors shall determine fair market values for
the purposes of this Section 12.7, except as Section 12.8 otherwise provides in
the case of a spin-off.
62
The adjustment shall become effective immediately after the
record date for the determination of shareholders entitled to receive the
rights, warrants or options to which this Section 12.7 applies. If all of the
Ordinary Shares subject to such rights, warrants or options have not been issued
when such rights, warrants or options expire, then the Conversion Rate shall
promptly be readjusted to the Conversion Rate which would then be in effect had
the adjustment upon the issuance of such rights, warrants or options been made
on the basis of the actual number of Ordinary Shares issued upon the exercise of
such rights, warrants or options.
No adjustment shall be made under this Section 12.7 if the
application of the formula stated above in this Section 12.7 would result in a
value of R' that is equal to or less than the value of R.
Section 12.8 ADJUSTMENT FOR OTHER DISTRIBUTIONS. If, after the
Issue Date of the Securities, the Company distributes to all holders of its
Ordinary Shares any of its debt, securities or assets or any rights, warrants or
options to purchase securities of the Company (including securities or cash, but
excluding (x) distributions of Capital Stock referred to in Section 12.6 and
distributions of rights, warrants or options referred to in Section 12.7 and (y)
cash dividends or other cash distributions that are paid out of net income or
retained earnings as shown on the books of the Company unless such cash
dividends or other cash distributions are Extraordinary Cash Dividends) the
Conversion Rate shall be adjusted, subject to the provisions of the last
paragraph of this Section 12.8, in accordance with the formula:
R' = R X M
-----
(M-F)
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
M = the Market Price, minus, in the case of a distribution to which
Section 12.6(4) applies, for which (i) the record date shall occur on or before
the record date for the distribution to which this Section 12.8 applies and (ii)
the Ex-Dividend Time shall occur on or after the date of the Time of
Determination for the distribution to which this Section 12.8 applies, the fair
market value (on the record date for the distribution to which this Section 12.8
applies) of any Capital Stock of the Company distributed in respect of each
Ordinary Share in such Section 12.6(4) distribution.
F = the fair market value (on the record date for the distribution to
which this Section 12.8 applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each Ordinary Share in the distribution
to which this Section 12.8 is being applied (including, in the case of cash
dividends or other cash distributions giving rise to an adjustment, all such
cash distributed concurrently).
In the event the Company distributes shares of Capital Stock
of a Subsidiary, the Conversion Rate will be adjusted, if at all, based on the
market value of the Subsidiary stock so distributed relative to the market value
of the Ordinary Shares, as discussed below. The Board of
63
Directors shall determine fair market values for the purposes of this Section
12.8, except that in respect of a dividend or other distribution of shares of
Capital Stock of any class or series, or similar equity interests, of or
relating to a Subsidiary or other business unit of the Company (a "Spin-off"),
the fair market value of the securities to be distributed shall equal the
average of the daily Sale Prices of those securities for the five consecutive
Trading Days commencing on and including the sixth day of trading of those
securities after the effectiveness of the Spin-off. In the event, however, that
an underwritten initial public offering of the securities in the Spin-off occurs
simultaneously with the Spin-off, fair market value of the securities
distributed in the Spin-off shall mean the initial public offering price of such
securities and the Market Price shall mean the Sale Price for the Ordinary
Shares on the same Trading Day.
The adjustment shall become effective immediately after the
record date for the determination of shareholders entitled to receive the
distribution to which this Section 12.8 applies, except that an adjustment
related to a Spin-off shall become effective at the earlier to occur of (i) 10
Trading Days after the effective date of the Spin-off and (ii) the initial
public offering of the securities distributed in the Spin-off.
For purposes of this Section 12.8, the term "Extraordinary
Cash Dividend" shall mean the sum of (i) any cash and the fair market value of
any other consideration payable in respect of any tender offer by the Company or
any of its Subsidiaries for Ordinary Shares consummated within the preceding 12
months not triggering a Conversion Rate adjustment and (ii) all other all-cash
distributions to all or substantially all holders of Ordinary Shares made within
the preceding 12 months not triggering a Conversion Rate adjustment, exceeds an
amount equal to 12.5% of the market capitalization of the Ordinary Shares on the
Business Day immediately preceding the day on which the Company declares the
distribution.
If, upon the date prior to the Ex-Dividend Time with respect
to a cash dividend on the Ordinary Shares, the aggregate amount of such cash
dividend together with the amounts of all other cash dividends or cash
distributions gives rise to an adjustment of the Conversion Rate pursuant to
Section 12.6, then such cash dividend together with all such other cash
dividends or cash distributions shall, for purposes of applying the formula set
forth above in this Section 12.8, cause the value of "F" to equal (y) the
aggregate amount of such cash dividend together with the amounts of such other
cash dividends or cash distributions, minus (z) the aggregate amount of all cash
dividends or cash distributions for which a prior adjustment in the Conversion
Rate was previously made.
In the event that, with respect to any distribution to which
this Section 12.8 would otherwise apply, the difference "M-F" as defined in the
above formula is less than $1.00 or "F" is equal to or greater than "M", then
the adjustment provided by this Section 12.8 shall not be made and in lieu
thereof the provisions of Section 12.16 shall apply to such distribution.
Section 12.9 ADJUSTMENT FOR COMPANY TENDER OFFER
If, after the Issue Date of the Securities, the Company or any
Subsidiary of the Company pays holders of the Ordinary Shares in respect of a
tender or exchange offer, other than an odd-lot offer, by the Company or any of
its Subsidiaries for Ordinary Shares to the extent that the offer involves
aggregate consideration that, together with (i) any cash and the fair market
64
value of any other consideration payable in respect of any tender offer by the
Company or any of its Subsidiaries for shares of Ordinary Shares consummated
within the preceding 12 months not triggering a Conversion Rate adjustment and
(ii) all-cash distributions to all or substantially all holders of Ordinary
Shares made within the preceding 12 months not triggering a Conversion Rate
adjustment in each case, exceeds an amount equal to 12.5% of the market
capitalization of the Ordinary Shares on the expiration date of the tender
offer, the Conversion Rate shall be increased so that the same shall equal the
price determined by multiplying the Conversion Rate in effect immediately prior
to the effectiveness of the Conversion Rate increase contemplated by this
Section 12.9 by a fraction of which the denominator shall be the number of
Ordinary Shares outstanding (including any tendered or exchanged shares) at the
last time tenders or exchanges may be made pursuant to such tender or exchange
offer (the "Expiration Time") multiplied by the current market value per
Ordinary Share on the Trading Day on the NYSE next succeeding the Expiration
Time and the numerator shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to stockholders based on
the acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not withdrawn as
of the Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the number
of Ordinary Shares (less any Purchased Shares) at the Expiration Time and the
current market value per Ordinary Share on the Trading Day on the NYSE next
succeeding the Expiration Time, such increase to become effective immediately
prior to the opening of business on the day following the Expiration Time.
Section 12.10 WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment
in the Conversion Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Conversion Rate. Any adjustments that
are not made shall be carried forward and taken into account in any subsequent
adjustment.
All calculations under this Article XII shall be made to the
nearest cent or to the nearest 1/1,000th of a share, as the case may be.
Section 12.11 WHEN NO ADJUSTMENT REQUIRED. No adjustment need
be made as a result of: (i) the issuance of the rights; (ii) the distribution of
separate certificates representing the rights; (iii) the exercise or redemption
of the rights in accordance with any rights agreement; or (iv) the termination
or invalidation of the rights, in each case, pursuant to the Company's existing
stockholders rights plan, as amended, modified, or supplemented from time to
time or any newly adopted stockholders rights plans:
(1) upon the issuance of any Ordinary Shares pursuant to any
present or future plan providing for the reinvestment of dividends or interest
payable on securities of the Company and the investment of additional optional
amounts in Ordinary Shares under any plan;
(2) upon the issuance of any Ordinary Shares or options or
rights to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of or assumed by the Company or
any of its Subsidiaries; or
65
(3) upon the issuance of any Ordinary Shares pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible security
outstanding as of the date the Securities were first issued.
No adjustment need be made for a transaction referred to in
12.7 or 12.8 if Holders of the Securities may participate in the transaction on
a basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Ordinary Shares
participate in the transaction. No adjustment need be made for a transaction
referred to in 12.8 above if all Holders of the Securities may participate in
the transaction.
No adjustment need be made for a change in the par value or no
par value of the Ordinary Shares.
To the extent the Securities become convertible pursuant to
this Article XII in whole or in part into cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
Section 12.12 NOTICE OF ADJUSTMENT. Whenever the Conversion
Rate is adjusted, the Company shall promptly mail to Holders a notice of the
adjustment. The Company shall file with the Trustee and the Conversion Agent
such notice briefly stating the facts requiring the adjustment and the manner of
computing it. The certificate shall be conclusive evidence that the adjustment
is correct. Neither the Trustee nor any Conversion Agent shall be under any duty
or responsibility with respect to any such certificate except to exhibit the
same to any Holder desiring inspection thereof.
Section 12.13 VOLUNTARY INCREASE. The Company from time to
time may increase the Conversion Rate by any amount at any time for at least 20
days, so long as the increase is irrevocable during such period. Whenever the
Conversion Rate is increased, the Company shall mail to Securityholders and file
with the Trustee and the Conversion Agent a notice of the increase. The Company
shall mail the notice at least 15 days before the date the increased Conversion
Rate takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect. A voluntary increase of the Conversion Rate does
not change or adjust the Conversion Rate otherwise in effect for purposes of
Section 12.6, 12.7 or 12.8.
Section 12.14 NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action that would require an adjustment in
the Conversion Rate pursuant to Section 12.6, 12.7, 12.8 or 12.9 (unless no
adjustment is to occur pursuant to Section 12.11); or
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 12.16; or
(3) there is a liquidation or dissolution of the Company;
then the Company shall mail to Holders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend,
distribution or subdivision or the proposed
66
effective date of a combination, reclassification, consolidation, merger,
binding share exchange, transfer, liquidation or dissolution. The Company shall
file and mail the notice at least 15 days before such date. Failure to file or
mail the notice or any defect in it shall not affect the validity of the
transaction.
Section 12.15 REORGANIZATION OF COMPANY; SPECIAL
DISTRIBUTIONS. If the Company is a party to a transaction subject to Section 7.1
(other than a sale of all or substantially all of the assets of the Company in a
transaction in which the holders of Ordinary Shares immediately prior to such
transaction do not receive securities, cash or other assets of the Company or
any other person) or a merger or binding share exchange which reclassifies or
changes its outstanding Ordinary Shares, the person obligated to deliver
securities, cash or other assets upon conversion of Securities shall enter into
a supplemental indenture. If the issuer of securities deliverable upon
conversion of Securities is an Affiliate of the successor Company, that issuer
shall join in the supplemental indenture.
The supplemental indenture shall provide that the Holder of a
Security may convert it into the kind and amount of securities, cash or other
assets which such Holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such Holder had
converted the Security immediately before the effective date of the transaction,
assuming (to the extent applicable) that such Holder (i) was not a constituent
person or an Affiliate of a constituent person to such transaction; (ii) made no
election with respect thereto; and (iii) was treated alike with the plurality of
non electing Holders. The supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in this Article XII. The successor Company shall mail to
Securityholders a notice briefly describing the supplemental indenture.
If the Company makes a distribution to all holders of its
Ordinary Shares of any of its assets, or debt securities or any rights, warrants
or options to purchase securities of the Company that, but for the provisions of
the last paragraph of Section 12.8, would otherwise result in an adjustment in
the Conversion Rate pursuant to the provisions of Section 12.8, then, from and
after the record date for determining the holders of Ordinary Shares entitled to
receive the distribution, a Holder of a Security that converts such Security in
accordance with the provisions of this Indenture shall upon such conversion be
entitled to receive, in addition to the shares of Ordinary Shares into which the
Security is convertible, the kind and amount of securities, cash or other assets
comprising the distribution that such Holder would have received if such Holder
had converted the Security immediately prior to the record date for determining
the holders of Ordinary Shares entitled to receive the distribution.
Section 12.16 COMPANY DETERMINATION FINAL. Any determination
that the Company or the Board of Directors must make pursuant to Section 12.3,
12.6, 12.7, 12.8, 12.9, 12.10, 12.11, 12.15 or 12.17 is conclusive, absent
manifest error.
Section 12.17 TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has
no duty to determine when an adjustment under this Article XII should be made,
how it should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 12.15 need be entered into or
whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity
67
or value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article XII. Each Conversion Agent shall have the same protection under this
Section 12.17 as the Trustee.
Section 12.18 SIMULTANEOUS ADJUSTMENTS. In the event that this
Article XII requires adjustments to the Conversion Rate under more than one of
Sections 12.6(4), 12.7 or 12.8, and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of Section 12.6,
second, the provisions of Section 12.8 and, third, the provisions of Section
12.7.
Section 12.19 SUCCESSIVE ADJUSTMENTS. After an adjustment to
the Conversion Rate under this Article XII, any subsequent event requiring an
adjustment under this Article XII shall cause an adjustment to the Conversion
Rate as so adjusted.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
Section 13.2 NOTICES. Any request, demand, authorization,
notice, waiver, consent or communication shall be in writing and delivered in
person or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission (confirmed by guaranteed overnight
courier) to the following facsimile numbers:
if to the Company:
XL Capital Ltd
XL House
One Bermudiana Road
Hamilton, Bermuda HM11
Facsimile No. (441) 292-5280
Telephone No. (441) 292-8515
Attention: Paul S. Giordano
if to the Trustee:
State Street Bank and Trust Company
225 Asylum Street
23rd Floor
Hartford, Connecticut 06103
Telephone No. (860) 244-1859
Facsimile No. (860) 244-1897
Attention: Corporate Trust Administration (XL Capital Liquid Yield
Option(TM) Notes due 2021)
68
The Company or the Trustee by notice given to the other in the
manner provided above may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication given to a Securityholder shall be
mailed to the Securityholder, by first-class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be deemed sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the
Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying
Agent, Conversion Agent or co-registrar.
Section 13.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).
Section 13.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) if required by the Trustee, an Opinion of Counsel stating that, in
the opinion of such counsel, all such conditions precedent (to the extent of
legal conclusions) have been complied with.
Section 13.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each Officers'
Certificate or Opinion of Counsel with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that each person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
69
(4) a statement that, in the opinion of such person, such covenant or
condition has been complied with.
Section 13.6 SEPARABILITY CLAUSE. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 13.7 RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT
AND REGISTRAR. The Trustee may make reasonable rules for action by or a meeting
of Securityholders. The Registrar, the Conversion Agent, the Paying Agent and
the Reset Rate Agent may make reasonable rules for their functions.
Section 13.8 LEGAL HOLIDAYS. A "Legal Holiday" is any day
other than a Business Day. If any specified date (including a date for giving
notice) is a Legal Holiday, the action shall be taken on the next succeeding day
that is not a Legal Holiday, and, if the action to be taken on such date is a
payment in respect of the Securities, no interest, if any, shall accrue for the
intervening period.
Section 13.9 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS INDENTURE AND THE SECURITIES.
Section 13.10 NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
Section 13.11 SUCCESSORS. All agreements of the Company in
this Indenture and the Securities shall bind its successor. All agreements of
the Trustee in this Indenture shall bind its successor.
Section 13.12 MULTIPLE ORIGINALS. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
70
IN WITNESS WHEREOF, XL CAPITAL LTD has caused this Indenture to be duly
executed as a deed the day and year first before written.
The common seal of )
XL CAPITAL LTD )
was hereunto affixed )
in the presence of )
-----------------------------------
Name: Paul S. Giordano
Title: Executive Vice President
General Counsel & Secretary
Witness:
-----------------------------------
Name: Jerry de St. Paer
Title: Executive Vice President
Chief Financial Officer
71
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed this
Indenture as of the date first above written.
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------
Name:
Title:
EXHIBIT A
[FORM OF FACE OF GLOBAL SECURITY]
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE
CODE, THIS SECURITY IS ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE
DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND WILL BE SUBJECT TO
THE REGULATIONS GOVERNING CONTINGENT PAYMENT DEBT INSTRUMENTS FOR UNITED STATES
FEDERAL INCOME TAX PURPOSES. THE ISSUE DATE AND THE COMMENCEMENT DATE FOR THE
ACCRUAL OF ORIGINAL ISSUE DISCOUNT IS SEPTEMBER 7, 2001, AND THE YIELD TO
MATURITY FOR PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 2.875% PER ANNUM.
AS REQUIRED UNDER APPLICABLE TREASURY REGULATIONS, THE "COMPARABLE YIELD" IS SET
FORTH IN SECTION 2.14 OF THE INDENTURE PURSUANT TO WHICH THIS SECURITY IS BEING
ISSUED.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON THE
CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF XL
CAPITAL LTD THAT THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON CONVERSION
OF THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 OR ANOTHER AVAILABLE EXEMPTION THEREUNDER (IF AVAILABLE) OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS.
THIS SECURITY, ANY ORDINARY SHARES ISSUABLE UPON ITS
CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM
TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS
SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR
REGULATION OR INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND ANY
SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH
SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.
2
EX-4.50
4
c22070_ex4-50.txt
FORM OF LIQUID-YIELD OPTION NOTE
Exhibit 4.50
XL CAPITAL LTD
Liquid Yield Option(TM) Notes due 2021
No. CUSIP:
Issue Date: Original Issue Discount: $ (for each
Issue Price: $ (for each $1,000 principal $1,000 principal amount at maturity)
amount at maturity)
XL CAPITAL LTD, a Cayman Islands exempted limited company,
promises to pay to Cede & Co. or registered assigns, the principal amount of
dollars (U.S.$ ) (subject to increase in certain circumstances
as described on the other side of this Security) on September 7, 2021.
This Security shall not bear interest except as specified on
the other side of this Security. This Security shall accrete original issue
discount as specified on the other side of this Security. This Security is
convertible as specified on the other side of this Security.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated: September 7, 2001 XL CAPITAL LTD
By:
-------------------------
Title:
-----------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY,
as Trustee, certifies that this is one
of the Securities referred to in the
within-mentioned Indenture.
By
------------------------------
Authorized Signatory
Dated:
[FORM OF REVERSE OF GLOBAL SECURITY]
Liquid Yield Option(TM) Notes due 2021
The Company issued the Securities under an Indenture dated as
of September 7, 2001 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as in
effect from time to time (the "TIA"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture.
1. INTEREST.
Except as provided below, this Security shall not bear
periodic interest.
This Security shall accrete original issue discount at a rate
of 2.875 % per annum, on a semi-annual bond equivalent basis using a 360-day
year composed of twelve 30-day months, commencing on the Issue Date of this
Security.
GENERAL. Except as described below under "-Contingent Cash
Interest," we will not make periodic payments of interest on the Securities.
Each Security will be issued at an issue price of $565.01 per Security. However,
the Securities will accrue original issue discount while they remain
outstanding. Original issue discount is the difference between the issue price
and the principal amount at maturity of a Security. Original issue discount will
be calculated on a semi-annual bond equivalent basis at the yield to maturity of
the Securities, using a 360-day year comprised of twelve 30-day months. The
expected issue date for the Securities and the commencement date for the accrual
of original issue discount will be September 7, 2001. Contingent Cash Interest
on Securities converted after a record date but prior to the corresponding
interest payment date will be paid to the Holder of the Securities on the record
date but, upon conversion the Holder must pay the Company the interest which has
accrued and will be paid on such interest payment date. No such payment need be
made with respect to Securities which will be redeemed after a record date and
prior to the corresponding interest payment date.
If the Purchase Price, Redemption Price, Change in Control
Purchase Price Additional Amounts, Liquidated Damages or Accreted Value, as
applicable, of a Security or any portion of such Purchase Price, Redemption
Price, Change in Control Purchase Price, Additional Amounts, Liquidated Damages
or Accreted Value, as applicable, is not paid when due (whether upon
acceleration pursuant to Section 8.2 of the Indenture, upon the date set for
payment of the Redemption Price pursuant to Paragraph 7 hereof, upon the date
set for payment of the Purchase Price or the Change in Control Purchase Price
pursuant to Paragraph 9 hereof, or upon the Stated Maturity of this Security),
then in each such case the overdue amount shall, to the extent permitted by law,
bear interest at the rate of 2.875% per annum, compounded semi-annually, which
interest shall accrue from the date such overdue amount was originally due to
the date payment of such amount, including interest thereon, has been made or
duly provided for. All such interest shall be payable on demand and shall be
based on a 360-day year comprised of twelve 30-day months.
2. CONTINGENT CASH INTEREST.
(a) Commencing after September 7, 2004 the Company shall make
Contingent Cash Interest payments to the Holders of Securities, as below, during
any Semiannual Period if, but only if, the average Securities' Market Price of
one Security for the five Trading Days in the relevant Five-Trading-Day
Measurement Period equals 120% or more of the Accreted Value of such Security.
During any Semiannual Period when Contingent Cash Interest is payable pursuant
to this Paragraph, each Contingent Cash Interest payment due and payable
pursuant to this Paragraph on each $1,000 Principal amount at maturity of
Securities shall be calculated for any quarterly period of the applicable
Semiannual Period, and in each instance shall equal the greater of (i) $ .46
multiplied by 5.277 or (ii) the sum of all Regular Cash Dividends paid by the
Company per share on the Ordinary Shares during the applicable quarter of such
Semiannual Period multiplied by the then applicable Conversion Rate.
Contingent Cash Interest, if any, shall accrue as of the 15th
day preceding the last day of the relevant Semiannual Period (each a "Contingent
Cash Interest Record Date"), or, if the Company pays Regular Cash Dividends on
its Ordinary Shares during a quarter within the relevant Semiannual Period, as
of the Ordinary Shares Record Date. If we only pay Regular Cash Dividends for
one quarter within the relevant Semiannual Period, the remaining Contingent Cash
Interest will accrue as of the Contingent Cash Interest Record Date.
The Original Issue Discount of the Securities will continue to
accrue whether or not Contingent Cash Interest payments are made or any
Contingent Additional Principal accrues.
(b) PAYMENT OF CONTINGENT CASH INTEREST. Accrued and unpaid
Contingent Cash Interest, if any, shall be paid on the last day of such
Semiannual Period or, if the Company pays a Regular Cash Dividends on the
Ordinary Shares during a Semiannual Period, on the payment date for the related
Ordinary Shares dividend (in each case, a "Contingent Cash Interest Payment
Date"). Contingent Cash Interest payments on any Security that are payable, and
are punctually paid or duly provided for, on any Contingent Cash Interest
Payment Date shall be paid to the Person who is the Holder of that Security on
the Contingent Cash Interest Record Date or the Ordinary Shares Record Date, as
applicable, at the office or agency of the Company maintained for such purpose.
Each payment of Contingent Cash Interest on any Security shall be paid (A) if
such Security is held in the form of a Global Security, in same-day funds by
transfer to an account maintained by the payee located inside the United States,
or (B) if such Security is held in the form of a Certificated Security, by
check, mailed to the address of such Holder as set forth in the Security
Register. In the case of a Global Security, Contingent Cash Interest payable,
will be paid on the applicable Contingent Cash Interest Payment Date to the
Depositary for the purpose of permitting DTC to credit the interest received by
it in respect of such Global Security to the accounts of the beneficial owners
thereof.
(c) NOTICE. Upon determination that Holders of Securities will
be entitled to receive Contingent Cash Interest during a Semiannual Period,
prior to the start of such Semiannual Period, the Company will disseminate a
press release through Dow Jones & Company, Inc. or Bloomberg Business News
containing this information or publish the information on its Web site or
through such other public medium as it may use at that time.
2
(d) BID SOLICITATION AGENT. The Bid Solicitation Agent shall
solicit bids from securities dealers which the Company indicates that it
believes are willing to bid for the Securities. The Company initially appoints
the Trustee to act as the Bid Solicitation Agent. The Company may change the Bid
Solicitation Agent at its discretion; provided, however, the Bid Solicitation
Agent may not be an Affiliate of the Company.
3. CONTINGENT ADDITIONAL PRINCIPAL.
(a) On September 7, 2002 and September 7, 2003, if the Sale
Price of the Ordinary Shares is at or below the Ordinary Shares Threshold Price
(as set forth in the first column under the schedule below) for at least 20
Trading Days during the Thirty-Trading-Day Measurement Period prior to that
date, Contingent Additional Principal shall accrue on the Securities commencing
on such date at a rate of either 0.50% or .645% per year, computed on a
semiannual bond equivalent basis, on the sum of the Issue Price plus accrued
Original Issue Discount to such date for a period of one year, in accordance
with the schedule set forth below:
September 7, 2002
-----------------------------------------------------------------------------------------------------
Ordinary Shares Threshold Price Contingent Additional Adjusted Yield
(expressed as a percentage of the Accreted Conversion Principal
Price of the Securities)
-----------------------------------------------------------------------------------------------------
Equal to or less than 69% and .50% 3.375%
greater than 65%
-----------------------------------------------------------------------------------------------------
Equal to or less than 65% .645% 3.52%
-----------------------------------------------------------------------------------------------------
September 7, 2003
-----------------------------------------------------------------------------------------------------
Ordinary Shares Threshold Price Contingent Additional Adjusted Yield
(expressed as a percentage of the Accreted Conversion Principal
Price of the Securities)
-----------------------------------------------------------------------------------------------------
Equal to or less than 75% and .50% 3.375%
greater than 72%
-----------------------------------------------------------------------------------------------------
Equal to or less than 72% .645% 3.52%
-----------------------------------------------------------------------------------------------------
No Contingent Additional Principal will accrue after September
7, 2004.
(b) PAYMENT OF CONTINGENT ADDITIONAL PRINCIPAL. If payable,
the Contingent Additional Principal shall be paid on the Stated Maturity of the
Securities. Contingent Additional Principal shall be calculated on a semiannual
bond equivalent basis, using a 360-day year consisting of twelve 30-day months.
(c) Notice. In the event that any Contingent Additional
Principal accrues on the Securities, the Company will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on its Web site or through such
other public medium as it may use at that time. The Company shall also notify
the Trustee annually in writing, at such time that the Company files with the
Trustee
3
its annual reports or other information or documents pursuant to Section 6.2 of
the Indenture, of any accrual of Contingent Additional Principal and the
resulting increase in the Principal amount at maturity per Security. Following
its receipt of such notice, the Trustee shall provide such information to DTC
for dissemination to the participants of DTC.
4. METHOD OF PAYMENT.
Subject to the terms and conditions of the Indenture and
except as provided above in the case of Contingent Cash Interest, the Company
will make payments in cash at Stated Maturity and payments in cash, Ordinary
Shares or a combination thereof, as the case may be, in respect of Redemption
Prices, Purchase Prices and Change in Control Purchase Prices to Holders who
surrender Securities to a Paying Agent to collect such payments in respect of
the Securities. The Company will pay cash amounts in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. However, the Company may make such cash payments by wire transfers of
immediately available funds or, at the Company's option, by check payable in
such money.
5. PAYING AGENT, CONVERSION AGENT AND REGISTRAR.
Initially, the Trustee will act as Paying Agent, Conversion
Agent and Registrar. The Company may appoint and change any Paying Agent,
Conversion Agent or Registrar without notice, other than notice to the Trustee;
provided that the Company will maintain at least one Paying Agent in the State
of New York, City of New York, Borough of Manhattan, which shall initially be an
office or agency of the Trustee. The Company or any of its Subsidiaries or any
of their Affiliates may act as Paying Agent, Conversion Agent or Registrar.
6. INDENTURE.
The Company issued the Securities under an Indenture dated as
of September 7, 2001 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as in
effect from time to time (the "TIA"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.
The Securities are general unsecured obligations of the
Company limited to $508,842,000 aggregate principal amount at maturity (subject
to adjustments for Contingent Additional Principal and Contingent Cash Interest,
if any). The Indenture does not limit other indebtedness of the Company, secured
or unsecured.
7. REDEMPTION AT THE OPTION OF THE COMPANY.
No sinking fund is provided for the Securities. Subject to the
terms and conditions of this Indenture, the Securities are redeemable at the
option of the Company in whole or in part, at any time or from time to time on,
or after September 7, 2004 for a cash price equal to the Accreted Value plus
accrued and unpaid Contingent Cash Interest, if any, up to the Redemption Date
(the "Redemption Price").
4
8. NOTICE OF REDEMPTION.
Notice of redemption pursuant to Paragraph 7 of this Security
will be mailed at least 15 days but not more than 60 days before the Redemption
Date to each Holder of Securities to be redeemed at the Holder's registered
address. If money sufficient to pay the Redemption Price of all Securities (or
portions thereof) to be redeemed on the Redemption Date is deposited with the
Paying Agent prior to or on the Redemption Date, interest ceases to accrue on
such Securities or portions thereof on and after the Redemption Date. Securities
in denominations larger than $1,000 of principal amount may be redeemed in part
but only in integral multiples of $1,000 of principal amount.
9. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER.
(a) Subject to the terms and conditions of the Indenture, the
Company shall become obligated to purchase, at the option of the Holder, all or
any portion of the Securities held by such Holder on September 7, 2002,
September 7, 2003, September 7, 2004, September 7, 2006, September 7, 2008,
September 7, 2011 and September 7, 2016 or the next Business Day following such
dates to the extent such dates are not Business Days, in integral multiples of
$1,000 at a Purchase Price equal to the Accreted Value plus accrued and unpaid
Contingent Cash Interest, if any, on the Purchase Date. To exercise such right,
a Holder shall deliver to the Company a Purchase Notice containing the
information set forth in the Indenture, at any time from the opening of business
on the date that is 20 Business Days prior to such Purchase Date until the close
of business on the last day prior to such Purchase Date, and shall deliver the
Securities to the Paying Agent as set forth in the Indenture.
The Purchase Price may be paid, at the option of the Company,
in cash or by the issuance and delivery of Ordinary Shares, or in any
combination thereof.
(b) At the option of the Holder and subject to the terms and
conditions of the Indenture, the Company shall become obligated to offer to
purchase the Securities held by such Holder within 30 days (which purchase shall
occur 45 days after the date of the Company's notice) after the occurrence of a
Change in Control of the Company (as defined in the Indenture) for a Change in
Control Purchase Price equal to the Accreted Value plus accrued and unpaid
Contingent Cash Interest, if any, on the Change in Control Purchase Date, which
Change in Control Purchase Price shall be paid in cash or, at the Company's
option, Ordinary Shares (as calculated in accordance with Section 5.7 of the
Indenture).
(c) Holders have the right to withdraw any Purchase Notice
delivered pursuant to Paragraph 9(a) above or Change in Control Purchase Notice
delivered pursuant to Paragraph 9(c), as the case may be, by delivering to the
Paying Agent a written notice of withdrawal in accordance with the provisions of
the Indenture.
If cash (and/or Ordinary Shares if permitted under the
Indenture) sufficient to pay the Purchase Price or Change in Control Purchase
Price, as the case may be, of all Securities or portions thereof to be purchased
as of the Purchase Date or the Change in Control Purchase Date, as the case may
be, is deposited with the Paying Agent on the Business Day following the
Purchase Date or the Change in Control Purchase Date and other interest ceases
to accrue on
5
such Securities (or portions thereof) immediately after such Purchase Date or
Change in Control Purchase Date, and the Holder thereof shall have no other
rights as such other than the right to receive the Purchase Price or Change in
Control Purchase Price upon surrender of such Security.
10. CONVERSION.
(a) The initial Conversion Rate is 5.277 Ordinary Shares per
$1,000 principal amount at maturity of Securities, subject to adjustment in
certain events described in the Indenture. A Holder that surrenders Securities
for conversion will receive cash in lieu of any fractional Ordinary Share based
on the closing price of the Ordinary Shares of the Company on the Trading Day
immediately prior to the conversion date.
(b) During any Conversion Period, Holders may surrender
Securities for conversion into Ordinary Shares if the Sale Prices of the
Ordinary Shares for a period of at least 20 Trading Days in the 30 consecutive
Trading Day period ending on the first day of such Conversion Period is more
than 110% of the Accreted Conversion Price per Ordinary Share as determined by
the Conversion Agent on the first day of the Conversion Period. A "Conversion
Period" will be the period from and including the thirtieth Trading Day in a
fiscal quarter to but not including the thirtieth Trading Day in the immediately
following fiscal quarter.
(c) A Holder may also surrender for conversion a Security or
portion of a Security which has been called for redemption pursuant to Paragraph
7 hereof, and such Securities may be surrendered for conversion until the close
of business on the Business Day immediately preceding the Redemption Date. A
Security in respect of which a Holder has delivered a Purchase Notice or a
Change in Control Purchase Notice exercising the option of such Holder to
require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.
(d) (i) Holders may also surrender Securities for conversion
into Ordinary Shares during the five consecutive Trading Day period beginning 10
Business Days following any 10 consecutive trading-day period in which the
average of the Trading Prices for a Security was less than 95% of the average
Parity Value (as defined below) for that period.
The "Trading Price" of the Securities on any date of
determination means the average of the secondary market bid quotations per
Security obtained by State Street Bank and Trust Company for $10,000,000
principal amount at maturity of the Securities at approximately 4:00 p.m., New
York City time, on such determination date from three independent nationally
recognized securities dealers selected by the Company; provided that if at least
three such bids cannot reasonably be obtained by State Street Bank and Trust
Company, but two such bids are obtained, then the average of the two bids shall
be used, and if only one such bid can reasonably be obtained by State Street
Bank and Trust Company, this one bid shall be used. If State Street Bank and
Trust Company cannot reasonably obtain at least one bid for $10,000,000
principal amount of maturity of the Securities from a nationally recognized
securities dealer or in the reasonable judgment of the Company, the bid
quotations are not indicative of the secondary market value of the Securities,
then the trading price of the Securities will equal (a) the then-applicable
conversion rate of the Securities multiplied by (b) the closing price on the New
York Stock Exchange of the Company's Ordinary Shares on such determination date;
provided that the
6
Trustee shall not determine the trading price of the Securities unless requested
by the Company; and provided, further, that the Company shall have no obligation
to make such request unless a holder of Securities provides the Company with
reasonable evidence that the trading price of the Security may be less than 95%
of the average Parity Value; and at which time, the Company shall instruct the
Trustee to determine the trading price of the Securities beginning on the next
Trading Day on each successive Trading Day until the Trading Price is greater
than or equal to 95% of the Parity Value of the Securities. The Trustee shall be
entitled to select the appropriate method for determining the trading price of
the Securities and shall be entitled to all of the rights of the trustee set
forth in the Indenture in connection with any such determination. Any such
determination shall be conclusive absent manifest error. The "Parity Value" of
the Securities on any date of determination means the product of (x) the Sale
Price of the Ordinary Shares on such date and (y) the number of Ordinary Shares
including fractional shares into which such Securities are convertible on such
date.
(ii) Notwithstanding paragraph (a)(ii) above, if at conversion
the Sales Price of the Ordinary Shares is greater than 100% of the Accreted
Conversion Price but less than or equal to 110% of the Accreted Conversion
Price, then the Holders will receive, in lieu of Ordinary Shares based on the
applicable Conversion Rate, cash or Ordinary Shares, or a combination of both
cash and Ordinary Shares, with a value equal to the then Accreted Value of the
Securities on the Conversion Date (an " Accreted Value Conversion"). If there is
an Accreted Value Conversion, the Ordinary Shares will be valued at 100% of the
average Sales Price for the five Trading Days ending on the third day prior to
the date of conversion. If the Company elects to pay all or a portion of the
Accreted Value upon an Accreted Value Conversion in Ordinary Shares, the Company
will notify holders not less than five Business Days prior to the beginning of
the five day period in which Holders can convert their Securities pursuant to an
Accreted Value Conversion.
(e) In the event that the Company declares a dividend or
distribution described in Section 10.7 of the Indenture, or a dividend or a
distribution described in Section 10.8 of the Indenture where the fair market
value of such dividend or distribution per Ordinary Share, as determined in the
Indenture, exceeds 12.5% of the Sale Price of an Ordinary Share as of the
Business Day prior to the date of declaration for such distribution, the
Securities may be surrendered for conversion beginning on the date the Company
gives notice to the Holders of such right, which shall be not less than 20 days
prior to the Ex-Dividend Time for such dividend or distribution and Securities
may be surrendered for conversion at any time thereafter until the close of
business on the Business Day prior to the Ex-Dividend Time or until the Company
announces that such distribution will not take place.
(f) A Holder may surrender for conversion a Security or
portion of a Security during such period, if any, as (i) the credit rating
assigned to the Securities by Standard & Poor's Rating Group (or its successors)
is below BBB+, (ii) the credit rating assigned to the Securities by such rating
agency is suspended or withdrawn or (iii) such rating agency is no longer rating
the Securities.
(g) In the event the Company is a party to a consolidation,
merger or binding share exchange, as set forth in Section 7.1 of the Indenture,
pursuant to which the Ordinary Shares would be converted into cash, securities
or other property as set forth in Section 12.15 of
7
the Indenture, the Securities may be surrendered for conversion at any time from
and after the date which is 15 days prior to the date the Company announces as
the anticipated effective time until 15 days after the actual date of such
transaction.
(h) To surrender a Security for conversion, a Holder must (1)
complete and manually sign the irrevocable conversion notice below (or complete
and manually sign a facsimile of such notice) and deliver such notice to the
Conversion Agent, (2) surrender the Security to the Conversion Agent, (3)
furnish appropriate endorsements and transfer documents and (4) pay any transfer
or similar tax, if required.
(i) A Holder may convert a portion of a Security if the
principal amount at maturity of such portion is $1,000 or an integral multiple
of $1,000. No payment or adjustment will be made for dividends on the Ordinary
Shares except as provided in the Indenture. Except as provided in Paragraph 1
hereof, on conversion of a Security, the Holder will not receive any cash
payment representing accrued interest with respect to the converted Securities.
Instead, upon conversion the Company will deliver to the Holder a fixed number
of Ordinary Shares and any cash payment to account for fractional shares.
Accrued interest will be deemed paid in full rather than canceled, extinguished
or forfeited. The Company will not adjust the Conversion Rate to account for
accrued interest.
(j) The Conversion Rate will be adjusted as provided in
Article XII of the Indenture. The Company may increase the Conversion Rate for
at least 20 days, so long as the increase is irrevocable during such period.
(k) If the Company is a party to a consolidation, merger or
binding share exchange or a transfer of all or substantially all of its assets
as set forth in Section 7.1 of the Indenture, or upon certain distributions
described in Section 12.8 of the Indenture, the right to convert a Security into
Ordinary Shares may be changed into a right to convert it into securities, cash
or other assets of the Company or another person.
11. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.
A Holder may surrender for conversion any of the Securities
called for redemption at any time prior to the close of business one Business
Day prior to the Redemption Date, even if it is not otherwise convertible at
such time. If a Holder has already delivered a Purchase Notice or a Change in
Control Purchase Notice with respect to a Security, however, the Holder may not
surrender that Security for conversion until the Holder has withdrawn the notice
in accordance with the Indenture.
12. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in fully registered form, without coupons,
in denominations of $1,000 of principal amount at maturity and integral
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Securities selected for redemption (except, in the case
of a Security to be redeemed in part, the portion of the Security not to be
redeemed) or any Securities in respect of which a
8
Purchase Notice or Change in Control Purchase Notice has been given and not
withdrawn (except, in the case of a Security to be purchased in part, the
portion of the Security not to be purchased) or any Securities for a period of
15 days before the mailing of a notice of redemption of Securities to be
redeemed.
13. PERSONS DEEMED OWNERS.
The registered Holder of this Security may be treated as the
owner of this Security for all purposes.
14. UNCLAIMED MONEY OR SECURITIES.
The Trustee and the Paying Agent shall return to the Company
upon written request any money or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
subject to applicable unclaimed property law. After return to the Company,
Holders entitled to the money or securities must look to the Company for payment
as general creditors unless an applicable abandoned property law designates
another person.
15. TRUSTEE DEALINGS WITH THE COMPANY.
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
16. CALCULATIONS IN RESPECT OF SECURITIES.
The Company will be responsible for making all calculations
called for under the Securities. These calculations include, but not limited to,
determinations of the market prices of the Securities and the Ordinary Shares,
any accrued Contingent Cash Interest payable on the Securities, the Accreted
Value of the Securities and the Accreted Conversion Price of the Securities. The
Company will make these calculations in good faith and, absent manifest error,
the calculations will be final and binding on Holders of the Securities. The
Company will provide to the Trustee a schedule of its calculations, and the
Trustee is entitled to rely upon the accuracy of such calculations without
independent verification. The Trustee will forward the Company's calculations to
any Holder of the Securities upon the request of such Holder.
17. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or shareholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
9
18. AUTHENTICATION.
This Security shall not be valid until an authorized signatory
of the Trustee manually signs the Trustee's Certificate of Authentication on the
other side of this Security.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE
AND THIS SECURITY.
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture which has in it the text of
this Security in larger type. Requests may be made to:
XL Capital Ltd
XL House
One Bermudiana Road
Hamilton, Bermuda HM11
Attn: Gavin R. Arton
21. REGISTRATION RIGHTS.
The Holders of the Securities are entitled to the benefits of
the Registration Rights Agreement, dated as of September 7, 2001, between the
Company and Merrill Lynch & Co., Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated including the receipt of liquidated damages ("Liquidated Damages")
upon a registration default (as defined in such agreement).
10
--------------------------------------------------------------------------------------------------
ASSIGNMENT FORM CONVERSION NOTICE
--------------------------------------------------------------------------------------------------
To assign this Security, fill in the form below: To convert this Security into Ordinary
Shares of the Company, check the box [ ]
--------------------------------------------------------------------------------------------------
I or we assign and transfer this Security to To convert only part of this Security,
state the principal amount to be converted
------------------------- (which must be $1,000 or an integral
multiple of $1,000):
-------------------------
(Insert assignee's soc. sec. or tax ID no.)
------------------------- If you want the stock certificate made out
in another person's name fill in the form
------------------------- below:
------------------------- -------------------------
(Print or type assignee's name, address and zip
code) -------------------------
(Insert the other person's soc. sec. tax
and irrevocably appoint ID no.)
agent to transfer
---------------------- this Security on the books --------------------------
of the Company. The agent may substitute another
to act for him. --------------------------
--------------------------
--------------------------
--------------------------
(Print or type other person's name,
address and zip code)
--------------------------------------------------------------------------------------------------
Date: Your Signature:
----------- ----------------------------------------
------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guaranteed
---------------------------------------
Participant in a Recognized Signature
Guarantee Medallion Program
By:
------------------------------------
Authorized Signatory
11
SCHEDULE OF INCREASES AND DECREASES OF GLOBAL SECURITY
Initial Principal amount at maturity of Global Security: _________($__________).
-------------------------------------------------------------------------------------------------------------
Date Amount of Increase Amount of Decrease in Principal amount at Notation by
in principal amount principal amount at maturity of Global Registrar or
at maturity of maturity of Global Security After Security Custodian
Global Security Security Increase or Decrease
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
EXHIBIT B
Liquid Yield Option(TM) Notes due 2021
Transfer Certificate
In connection with any transfer of any of the Securities
within the period prior to the expiration of the holding period applicable to
the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended
(the "Securities Act") (or any successor provision), the undersigned registered
owner of this Security hereby certifies with respect to $____________ principal
amount at maturity of the above-captioned Securities presented or surrendered on
the date hereof (the "Surrendered Securities") for registration of transfer, or
for exchange or conversion where the securities issuable upon such exchange or
conversion are to be registered in a name other than that of the undersigned
registered owner (each such transaction being a "transfer"), that such transfer
complies with the restrictive legend set forth on the face of the Surrendered
Securities for the reason checked below:
[_] A transfer of the Surrendered Securities is made to the
Company or any of its subsidiaries; or
[_] The transfer of the Surrendered Securities complies
with Rule 144A under the Securities Act; or
[_] The transfer of the Surrendered Securities is pursuant
to an effective registration statement under the
Securities Act, or
[_] The transfer of the Surrendered Securities
is pursuant to another available exemption
from the registration requirements of the
Securities Act.
and unless the box below is checked, the undersigned confirms
that, to the undersigned's knowledge, such Securities are not being transferred
to an "affiliate" of the Company as defined in Rule 144 under the Securities Act
(an "Affiliate").
[_] The transferee is an Affiliate of the Company.
DATE:
---------------------------
Signature(s)
(If the registered owner is a corporation, partnership or
fiduciary, the title of the person signing on behalf of such registered owner
must be stated.)
2
Signature Guaranteed
------------------------------------------
Participant in a Recognized Signature
Guarantee Medallion Program
By:
---------------------------------------
Authorized Signatory
EX-4.51
5
c22070_ex4-51.txt
REGISTRATION RIGHTS AGREEMENT
Exhibit 4.51
XL CAPITAL LTD
LIQUID YIELD OPTION(TM) NOTES DUE 2021
REGISTRATION RIGHTS AGREEMENT
September 7, 2001
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
XL Capital Ltd, a Cayman Islands limited liability company (the
"Company"), proposes to issue and sell to the Purchaser (as defined herein) upon
the terms and conditions set forth in the Purchase Agreement (as defined herein)
its Liquid Yield Option(TM) Notes due September 7, 2021 (the "Securities"),
convertible into Ordinary Shares (as defined herein). In satisfaction of a
condition to the obligations of the Purchaser thereunder, the Company agrees
with the Purchaser for the benefit of Holders (as defined herein) from time to
time of the Registrable Securities (as defined herein) as follows:
1. DEFINITIONS.
(a) Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Purchase Agreement. As used in this Agreement,
the following defined terms shall have the following meanings:
"ACT" OR "SECURITIES ACT" means the United States Securities Act of
1933, as amended.
"AFFILIATE" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"APPLICABLE AMOUNT" means, with respect to each $1,000 principal amount
at maturity of Securities, the Accreted Value (as defined in the Indenture) plus
any accrud and unpaid Contingent Cash Interest through the date of
determination, or, with respect to Securities that have been converted to
Ordinary Shares pursuant to the Indenture, such sum calculated as if such
Securities had not been so converted.
"CLOSING DATE" means the First Time of Delivery as defined in the
Purchase Agreement.
"COMMISSION" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Exchange
Act or the Securities Act, whichever is the relevant statute for the particular
purpose.
"DTC" means The Depository Trust Company.
"EFFECTIVENESS PERIOD" has the meaning assigned thereto in Section
2(b)(i) hereof.
"EFFECTIVE TIME" means the date on which the Commission declares the
Shelf Registration Statement effective or on which the Shelf Registration
Statement otherwise becomes effective.
"ELECTING HOLDER" has the meaning assigned thereto in Section 3(a)(iv)
hereof.
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934,
as amended.
"HOLDER" means, any person that is the record owner of Registrable
Securities (and includes any person that has a beneficial interest in any
Registrable Security in book-entry form).
"INDENTURE" means the Indenture, dated as of September 7, 2001, between
the Company and State Street Bank and Trust Company, as amended and supplemented
from time to time in accordance with its terms.
"LIQUIDATED DAMAGES" has the meaning assigned thereto in Section 7(a)
hereof.
"MANAGING UNDERWRITERS" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering,
if any, conducted pursuant to Section 7 hereof.
"NASD RULES" means the Rules of the National Association of
Securities Dealers, Inc., as amended from time to time.
"NOTICE AND QUESTIONNAIRE" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
"ORDINARY SHARES" means the Company's Class A ordinary shares, par
value $0.01 per share.
The term "PERSON" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"PROSPECTUS" means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act) included in the
Shelf Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Shelf Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
"PURCHASE AGREEMENT" means the purchase agreement, dated as of
September 4, 2001, among the Purchaser and the Company relating to the
Securities.
"PURCHASER" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"REGISTRABLE SECURITIES" means all or any portion of the Securities
issued from time to time under the Indenture in registered form and the Ordinary
Shares issuable upon conversion of such Securities; PROVIDED, HOWEVER, that a
security ceases to be a Registrable Security when it is no longer a Restricted
Security.
"REGISTRATION DEFAULT" has the meaning assigned thereto in Section 7(a)
hereof.
"RESTRICTED SECURITY" means any Security or Ordinary Share issuable
upon conversion thereof except any such Security or Ordinary Share which (i) has
been effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto), (iii) has been sold in compliance with Regulation
S under the Securities Act (or any successor thereto) and does not constitute
the unsold allotment of a distributor within the meaning of Regulation S under
the Securities Act, (iv) has otherwise been transferred and a new Security or
Ordinary Share not subject to transfer restrictions under the Securities Act has
been delivered by or on behalf of the Company in accordance with Section 2.6(f)
of the Indenture or (v) is otherwise transferable without restriction under the
Securities Act.
"RULES AND REGULATIONS" means the published rules and regulations of
the Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.
"SHELF REGISTRATION" means a registration effected pursuant to Section
2 hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
filed under the Securities Act providing for the registration of, and the sale
on a continuous or delayed basis by the Holders of, all of the Registrable
Securities (other than Registrable Securities, the holders of which have failed
to comply with Section 3(a)(iii) hereof) pursuant to Rule 415 under the
Securities Act and/or any similar rule that may be adopted by the Commission,
filed by the Company pursuant to the provisions of Section 2 of this Agreement,
including the Prospectus contained therein, any amendments and supplements to
such registration statement, including post-effective amendments, and all
exhibits and all material incorporated by reference in such registration
statement.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.
The term "UNDERWRITER" means any underwriter of Registrable Securities
in connection with an offering thereof under a Shelf Registration Statement.
(b) Wherever there is a reference in this Agreement to a percentage of
the "principal amount" of Registrable Securities or to a percentage of
Registrable Securities, Ordinary Shares shall be treated as representing the
Applicable Amount.
2. SHELF REGISTRATION.
(a) The Company shall, no later than 90 calendar days following the
Closing Date, file with the Commission a Shelf Registration Statement relating
to the offer and sale of the Registrable Securities by the Holders from time to
time and, thereafter, shall use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective under the Act as promptly as
practicable, but in no event later than 210 calendar days following the Closing
Date; PROVIDED, HOWEVER, that the Company may, upon written notice to all
Holders, postpone having the Shelf Registration Statement declared effective for
a reasonable period not to exceed 90 days if the Company possesses material
non-public information and the Company reasonably determines that the disclosure
of this material non-public information would have a material adverse effect on
the Company and its subsidiaries taken as a whole or would impede the
consummation of any proposed or pending material business transaction; PROVIDED,
FURTHER, however, that no Holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the Prospectus
forming a part thereof for resales of Registrable Securities unless such Holder
is an Electing Holder.
(b) The Company shall use its reasonable best efforts:
(i) To keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming a part thereof to
be usable by Holders until the earliest of (1) the date when all
Registrable Securities of Holders that complete and deliver in a timely
manner (as described in Section 3(a) hereof) the Notice and
Questionnaire are registered under the Shelf Registration Statement and
have been registered and disposed of in accordance with the Shelf
Registration Statement; (2) the expiration of the period referred to in
Rule 144(k) of the Act with respect to all Registrable Securities held
by Persons that are not Affiliates of the Company; (3) the date when
there are no outstanding Registerable Securities; and (4) two years
from the date (the "Effective Date") such Shelf Registration Statement
is declared effective (such period being referred to herein as the
"Effectiveness Period"); and
(ii) If at any time the Securities, pursuant to Article XII
of the Indenture, are convertible into securities other than Ordinary
Shares, the Company shall, or shall cause any successor under the
Indenture to agree to, cause such securities to be included in the
Shelf Registration Statement no later than the date on which the
Securities may then be convertible into such securities.
Other than due to any suspension of the use of the Prospectus pursuant to
Section 2(c) hereof, the Company shall be deemed not to have used its reasonable
best efforts to keep the Shelf Registration Statement effective during the
requisite period if the Company voluntarily takes any action that would result
in Holders of Registrable Securities covered thereby not being able to offer and
sell any of such Registrable Securities during that period, unless such action
is required by applicable law and the Company thereafter promptly complies with
the requirements of paragraph 3(j) below.
(c) The Company may suspend the use of the Prospectus for a period not
to exceed 45 days in any 90-day period or an aggregate of 90 days in any 360-day
period if (i) the Prospectus would, in the Company's judgment, contain a
material misstatement or omission as a result of an event that has occurred and
is continuing or as a result of any proposed or pending material business
transaction; and (ii) the Company reasonably determines that the disclosure of
this material non-public information would have a material adverse effect on the
Company and its subsidiaries taken as a whole or would impede the consummation
of any proposed or pending material business transaction, PROVIDED; HOWEVER,
that prior to
suspending the use of the Prospectus, the Company provides the Trustee with
written notice of such suspension, which notice need not specify the nature of
the event giving rise to such suspension.
However, if the disclosure relates to a previously undisclosed proposed
or pending material business transaction, the disclosure of which would impede
the Company's ability to consummate such transaction, the Company may extend the
suspension period from 45 days to 75 days. Each holder, by its acceptance of the
Registrable Securities, agrees to hold any communication by the Company in
response to a notice of a proposed sale in confidence.
3. REGISTRATION PROCEDURES. In connection with the Shelf
Registration Statement, the following provisions shall apply:
(a) (i) Not less than 30 calendar days prior to the expected Effective
Time of the Shelf Registration Statement, the Company shall give notice of its
intention to file the Shelf Registration Statement to each holder of Registrable
Securities in the manner provided by Section 13.2 of the Indenture; such notice
shall be substantially in the form of the Notice and Questionnaire set forth as
Exhibit A hereto; no Holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement as of the Effective Time, and
no Holder shall be entitled to use the Prospectus forming a part thereof for
resales of Registrable Securities at any time, unless such Holder has returned a
completed and signed Notice and Questionnaire to the Company by the deadline for
response set forth therein; PROVIDED, HOWEVER, that such deadline shall be at
least 20 business days from the date on which the Notice and Questionnaire is
first mailed to Holders.
(ii) Holders who have not returned a completed and signed
Notice and Questionnaire to the Company by the deadline for response
set forth therein may receive an additional Notice and Questionnaire
from the Company upon request by the Holder. Following the receipt of a
completed and signed Notice and Questionnaire, the Company will, prior
to the Effective Time, include the Securities covered thereby in the
Shelf Registration Statement, subject to restrictions on the timing and
number of supplements to the Shelf Registration Statement provided for
in this Section 3 and Section 6 hereof.
(iii) After the Effective Time of the Shelf Registration
Statement, and subject to the Rules and Regulations and policies of the
Commission, the Company shall, upon the request of any Holder of
Registrable Securities that is not then an Electing Holder, promptly
send a Notice and Questionnaire to such Holder. The Company shall not
be required to take any action to name such Holder as a selling
securityholder in the Shelf Registration Statement or to enable such
Holder to use the Prospectus forming a part thereof for resales of
Registrable Securities until such Holder has returned a completed and
signed Notice and Questionnaire to the Company.
(iv) The term "Electing Holder" shall mean any Holder of
Registrable Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with (a)(i), (a)(ii) or
(a)(iii) of this Section 3.
(b) The Company shall furnish to the counsel for the Holders of
Registrable Securities, prior to the filing thereof with the Commission, a copy
of the Shelf Registration Statement and each amendment or supplement, if any, to
the Prospectus included therein, and shall afford such counsel a reasonable
opportunity to comment thereon.
(c) The Company shall promptly take such action as may be necessary so
that (i) each of the Shelf Registration Statement and any amendment thereto and
the Prospectus forming a part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference in each
case) complies in all material respects with the Securities Act and the Exchange
Act and the respective rules and regulations thereunder, (ii) each of the Shelf
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) each of the Prospectus forming a part of the
Shelf Registration Statement, and any amendment or supplement to such
Prospectus, does not at any time during the Effectiveness Period include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The Company shall promptly advise each Electing Holder:
(i) when a Shelf Registration Statement and any amendment
thereto has been filed with the Commission and when a Shelf
Registration Statement or any post-effective amendment thereto has
become effective, in each case, at the option of the Company, by making
a public announcement thereof by a press release made through Dow Jones
& Company, Inc. or Bloomberg Business News or such other public medium
as the Company may use at such time;
(ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for such purpose;
(iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities
included in the Shelf Registration Statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and
(iv) of the happening of any event or the existence of any state of
facts that requires the making of any changes in the Shelf Registration
Statement or the Prospectus included therein so that, as of such date,
such Shelf Registration Statement and Prospectus do not contain an
untrue statement of a material fact and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading (which advice shall be
accompanied by an instruction to such Holders to suspend the use of the
Prospectus until the requisite changes have been made, which notice
need not specify the nature of the event giving rise to such
suspension).
(e) The Company shall use its reasonable best efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Shelf Registration Statement at the earliest possible time.
(f) The Company shall furnish to each Electing Holder, upon request,
without charge, at least one copy of the Shelf Registration Statement and all
post-effective amendments thereto, including
financial statements and schedules, and, if such Holder so requests in writing,
all other documents and exhibits that are filed with or incorporated by
reference in the Shelf Registration Statement.
(g) The Company shall, during the Effectiveness Period, deliver to each
Electing Holder, without charge, as many copies of the Prospectus (including
each preliminary Prospectus) included in the Shelf Registration Statement and
any amendment or supplement thereto as such Electing Holder may reasonably
request; and the Company consents (except during the continuance of any event
described in Section 3(d)(iv) above to the use of the Prospectus and any
amendment or supplement thereto by each of the Electing Holders in connection
with the offering and sale of the Registrable Securities covered by the
Prospectus and any amendment or supplement thereto during the Effectiveness
Period.
(h) Prior to any offering of Registrable Securities pursuant to the
Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Electing Holders and their counsel (which shall be Skadden,
Arps, Slate, Meagher & Flom LLP) in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or "blue sky" laws of such jurisdictions within the United States as
any Electing Holder may reasonably request (other than the State of Florida),
(ii) keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers and sales in such jurisdictions
for so long as may be necessary to enable any Electing Holder or underwriter, if
any, to complete its distribution of Registrable Securities pursuant to the
Shelf Registration Statement, and (iii) take any and all other actions necessary
or advisable to enable the disposition in such jurisdictions of such Registrable
Securities; PROVIDED, HOWEVER, that in no event shall the Company be obligated
to (A) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Section 3(h) or (B) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof so subject.
(i) Upon the occurrence of any fact or event contemplated by paragraph
3(d)(iv) above, the Company shall, subject to Section 2(c) hereof, promptly
prepare a post-effective amendment to the Shelf Registration Statement or an
amendment or supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to Purchaser of the Registrable
Securities included therein, the Prospectus will not include an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If the Company notifies the Electing Holders of the
occurrence of any event contemplated by paragraph 3(d)(v) above, the Electing
Holder shall suspend the use of the Prospectus until the requisite changes to
the Prospectus have been made.
(j) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall provide a CUSIP number for the Registrable
Securities that are debt securities.
(k) The Company shall use its reasonable best efforts to comply with
all applicable Rules and Regulations, and to make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
months after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Shelf Registration Statement, (ii) the effective date of
each post-effective amendment to the Shelf Registration Statement, and (iii) the
date of each filing by the Company with the Commission of an Annual Report on
Form 10-K that is incorporated by reference in the Shelf Registration Statement,
an earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158).
(l) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall cause the Indenture to be qualified under the Trust
Indenture Act; in connection with such qualification, the Company shall
cooperate with the Trustee under the Indenture and the Holders (as defined in
the Indenture) to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the Trust
Indenture Act; and the Company shall execute, and shall use all reasonable
efforts to cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner.
In the event that any such amendment or modification referred to in this Section
3(m) involves the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
the Indenture.
(m) In the event of an underwritten offering conducted pursuant to
Section 6 hereof, the Company shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the Shelf
Registration Statement such information as the Company and the Managing
Underwriters reasonably agree should be included therein and shall make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment.
(n) The Company shall enter into such customary agreements, other than
lock-up agreements unless the Company otherwise consents, (including an
underwriting agreement in customary form in the event of an underwritten
offering conducted pursuant to Section 6 hereof) and use its reasonable best
efforts to take all other necessary action in order to effect the registration
of the Registrable Securities in accordance with this Agreement, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures substantially
identical to those set forth in Section 5 hereof with respect to all parties to
be indemnified pursuant to Section 5 hereof.
(o) The Company shall use its reasonable best efforts to:
(i)(A) make reasonably available for inspection by Electing Holders,
any underwriter participating in any disposition pursuant to the Shelf
Registration Statement, and any attorney, accountant or other agent
retained by such Holders or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, provided, that if more than one attorney
is representing the Electing Holders, such attorneys shall make
reasonable efforts to coordinate their investigations in a manner so as
not to cause undue burden to the Company, and (B) cause the Company's
officers, directors and employees to supply all information reasonably
requested by such Holders or any such underwriter, attorney, accountant
or agent in connection with the Shelf Registration Statement, in each
case, as is customary for similar due diligence examinations; PROVIDED,
HOWEVER, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential
shall be kept confidential by such Electing Holders and any such
underwriter, attorney, accountant or agent, unless such disclosure is
made, after prior written notice to the Company and a reasonable
opportunity on the part of the Company to prevent and/or limit such
disclosure, in connection with a court proceeding or required by law,
or such records, information or documents become available to the
public generally; and PROVIDED FURTHER that such inspection and
information gathering shall be coordinated on behalf of the Electing
Holders by one counsel designated by and on behalf of Electing Holders
and other parties, which shall be Skadden, Arps, Slate, Meagher & Flom
LLP;
(ii) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, make such representations and warranties to the
Holders participating in such underwritten offering and to the Managing
Underwriters, in form, substance and scope, and subject to such
exceptions and qualifications, as are customarily made by the Company
to underwriters in primary underwritten offerings of equity and
convertible debt securities and covering matters including those set
forth in the Purchase Agreement;
(iii) in connection with any underwritten offering conducted pursuant
to Section 6 hereof, obtain opinions of counsel to the Company (which
counsel and opinions (in form, scope and substance, and subject to such
exceptions and qualifications) shall be reasonably satisfactory to the
Managing Underwriters) addressed to each Holder participating in such
underwritten offering and the underwriters, covering such matters as
are customarily covered in opinions requested in primary underwritten
offerings of equity and convertible debt securities (it being agreed
that the matters to be covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the Effective Time
of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from the Shelf
Registration Statement and the Prospectus, including the documents
incorporated by reference therein, of an untrue statement of a material
fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading);
(iv) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, if requested, obtain "cold comfort" letters and
updates thereof from the independent public accountants of the Company
(and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Shelf Registration Statement, except Winterthur
International), addressed to the underwriters, in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with primary underwritten offerings of offerings
of equity and convertible debt securities of the Company;
(v) in connection with any underwritten offering conducted pursuant to
Section 6 hereof, deliver such documents and certificates concerning
such matters as are customarily covered by or in such documents and
certificates as may be reasonably requested by the Managing
Underwriters, if any, or Skadden, Arps, Slate, Meagher & Flom LLP, on
behalf of all Electing Holders, including, without limitation,
certificates to evidence compliance with Section 3(j)
hereof and with any conditions contained in the underwriting agreement
or other agreements entered into by the Company.
(p) The Company will use its reasonable best efforts to cause the
Ordinary Shares issuable upon conversion of the Securities to be listed on the
New York Stock Exchange or other stock exchange or trading system on which the
Ordinary Shares primarily trade on or prior to the Effective Time of the Shelf
Registration Statement hereunder.
(q) In the event that any broker-dealer registered under the Exchange
Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD Rules (or
any successor provision thereto)) of the Company or has a "conflict of interest"
(as defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision
thereto)) and such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution of any
Registrable Securities covered by the Shelf Registration Statement, whether as a
Holder of such Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer (at such broker-dealer's expense) in complying with
the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the registration statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereto and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. REGISTRATION EXPENSES. Except as otherwise provided in Section 3,
the Company shall bear all fees and expenses incurred in connection with the
performance of its obligations under Sections 2 and 3 hereof and shall reimburse
the Electing Holders for the reasonable fees and disbursements of a single
counsel, which shall be Skadden, Arps, Slate, Meagher & Flom LLP, to act as
counsel therefore in connection therewith. Each Electing Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Electing Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify
and hold harmless each Electing Holder and each underwriter, selling agent or
other securities professional, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Electing Holder, underwriter, selling agent or
other securities professional within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (each such person being sometimes referred
to herein as an "Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Shelf Registration Statement under which such Registrable
Securities are to be registered under the Securities Act, or any Prospectus
contained therein or furnished by the Company to any Indemnified Person, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company hereby agrees to reimburse such Indemnified Person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; PROVIDED,
HOWEVER, that the Company shall not be liable to any such Indemnified Person in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Shelf Registration Statement or
Prospectus, or amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein; PROVIDED FURTHER that as to any preliminary
Prospectus, this indemnity agreement shall not inure to the benefit of any
Indemnified Person on account of any loss, claim, damage, liability or action
arising from the sale of the Registrable Securities sold pursuant to the Shelf
Registration Statement to any person by such Indemnified Person if (i) that
Indemnified Person failed to send or give a copy of the Prospectus, as the same
may be amended or supplemented, to that person within the time required by the
Securities Act and (ii) the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in such
preliminary Prospectus was corrected in the Prospectus or a supplement or
amendment thereto, as the case may be, unless in each case, such failure
resulted from noncompliance by the Company with Section 3.
(b) INDEMNIFICATION BY THE HOLDERS AND ANY AGENTS AND UNDERWRITERS.
Each Electing Holder agrees, as a consequence of the inclusion of any of such
Holder's Registrable Securities in such Shelf Registration Statement, and each
underwriter, selling agent or other securities professional, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors, its officers who sign any Shelf Registration Statement and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities to which the Company or such other persons may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in such Shelf Registration Statement or Prospectus, or any
amendment or supplement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Holder,
underwriter, selling agent or other securities professional expressly for use
therein, and to (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under this Section 5, notify such
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 5. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party under this
Section 5 for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, (i) without the written consent of the indemnified party, effect
the settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (x) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (y) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party or
(ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss of liability by
reason of such settlement or judgment in accordance with this Section 5.
(d) CONTRIBUTION. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation (even if the Electing Holders or any underwriters, selling
agents or other securities professionals or all of them were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 5(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Electing Holders and any underwriters,
selling agents or other securities professionals in this Section 5(d) to
contribute shall be several in proportion to the percentage of principal amount
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.
(e) Notwithstanding any other provision of this Section 5, in no event
will any (i) Electing Holder be required to undertake liability to any person
under this Section 5 for any amounts in excess of the dollar amount of the
proceeds to be received by such Holder from the sale of such Holder's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Shelf Registration Statement under which
such Registrable Securities are to be registered under the Securities Act and
(ii) underwriter, selling agent or other securities professional be required to
undertake liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.
(f) The obligations of the Company under this Section 5 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
6. UNDERWRITTEN OFFERING. If Electing Holders of at least 33-1/3% in
aggregate principal amount of the Registrable Securities then covered by the
Shelf Registration Statement shall so request in writing to the Company, any
Holder of Registrable Securities who desires to do so may sell Registrable
Securities (in whole or in part) in an underwritten offering; PROVIDED, HOWEVER,
that at least $150,000,000 aggregate principal amount at maturity of such
Registrable Securities shall be included in such offering; and the Company shall
not be obligated to cooperate with more than one underwritten offering during
the Effectiveness Period. Upon receipt of such a request, the Company shall
provide all Holders of Registrable Securities written notice of the request,
which notice shall inform such Holders that they have the opportunity to
participate in the offering. In any such underwritten offering, the investment
banker or bankers and manager or managers that will administer the offering will
be selected by, and the underwriting arrangements with respect thereto
(including the size of the offering) will be approved by, the Company; PROVIDED,
HOWEVER, that such investment bankers and managers and underwriting arrangements
must be reasonably satisfactory to the Company. No Holder may participate in any
underwritten offering contemplated hereby unless (a) such Holder agrees to sell
such Holder's Registrable Securities to be included in the underwritten offering
in accordance with any approved underwriting arrangements, (b) such Holder
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such approved underwriting arrangements, and (c) if such Holder is not
then an Electing Holder, such Holder returns a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a)(ii) hereof within a
reasonable amount of time before such underwritten offering. The Holders
participating in any underwritten offering shall be responsible for any
underwriting discounts and commissions and fees and, subject to Section 4
hereof, expenses of their own counsel. The Company shall pay all expenses
customarily borne by issuers, including but not limited to Commission filing
fees, the fees and disbursements of its counsel and independent public
accountants and any printing expenses incurred in connection with such
underwritten offering. Notwithstanding the foregoing or the provisions of
Section 3(n) hereof, upon receipt of a request from the Managing Underwriter or
a representative of Holders of a majority of the Registrable Securities to be
included in an underwritten offering to prepare and file an amendment or
supplement to the Shelf Registration Statement and Prospectus in connection with
an underwritten offering, the Company may delay the filing of any such amendment
or supplement
for up to 90 days if the Board of Directors of the Company shall have determined
in good faith that the Company has a bona fide business reason for such delay.
7. LIQUIDATED DAMAGES.
(a) Subject to any postponement on the effectiveness of the
registration statement pursuant to Section 2(a) hereof or the use of the
Prospectus pursuant to Section 2(c) hereof, if (i) on or prior to the 120th day
following the Closing Date, a Shelf Registration Statement has not been filed
with the Commission, (ii) on or prior to the 210th day following the Closing
Date, such Shelf Registration Statement is not declared effective by the
Commission, or (iii) (x) the Shelf Registration Statement ceases to be effective
or fails to be usable subsequent to the 210th day following the Closing Date and
(y) the Company does not cure the Shelf Registration Statement within ten
business days by a post-effective amendment or a report filed pursuant to the
Exchange Act or (z) if applicable, the Company does not terminate the suspension
period pursuant of Section 2(c) hereof, by the 45th or 75th day, as the case may
be (each, a "Registration Default"), the Company shall be required to pay in
cash liquidated damages ("Liquidated Damages") in respect of the Registrable
Securities, from and including the day following such Registration Default, but
excluding the day on which such Shelf Registration Statement is either so filed
or so filed and subsequently declared effective, as applicable, at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the
Applicable Amount, to and including the 90th day following such Registration
Default and an additional one-quarter of one percent (0.25%) of the Applicable
Amount from and after the 91st day following such Registration Default.
(b) In no event will Liquidated Damages accrue at a rate per year
exceeding 0.50%. If a Holder has converted some or all of its Securities into
Ordinary Shares, the Holder will be entitled to receive equivalent amounts based
on the principal amount at maturity of the Securities converted. A Holder will
not be entitled to Liquidated Damages unless it has provided all information
requested by the Notice and Questionnaire prior to the deadline.
(c) In the event the Company fails to file a post-effective amendment
to the Shelf Registration Statement required to be filed, or the post-effective
amendment is not declared effective, within the periods required by Section 3,
the Company shall pay Liquidated Damages at a rate per annum equal to an
additional one-quarter of one percent (0.25%) from and including the date of
such Registration Default until such time as such Registration Default is cured
subject to the limitations on Liquidated Damages pursuant to paragraph (b) of
this Section 7.
(d) Any amounts to be paid as Liquidated Damages pursuant to paragraphs
(a) or (c) of this Section 7 shall be paid in cash semi-annually in arrears,
with the first semi-annual payment due on the first September 7 or March 7, as
applicable, following the date on which such Liquidated Damages begin to accrue.
(e) The Liquidated Damages as set forth in this Section 7 shall be the
exclusive monetary remedy available to the Holders of Registrable Securities for
such Registration Default or Effective Failure. In no event shall the Company be
required to pay Liquidated Damages in excess of the applicable maximum amount of
one-half of one percent (0.5%) per year set forth above, regardless of whether
one or multiple Registration Defaults exist.
8. MISCELLANEOUS.
(a) OTHER REGISTRATION RIGHTS. The Company may grant registration
rights that would permit any Person that is a third party the right to
piggy-back on any Shelf Registration Statement, PROVIDED, HOWEVER, that if the
Managing Underwriter of any underwritten offering conducted pursuant to Section
6 hereof notifies the Company and the Electing Holders that the total amount of
securities which the Electing Holders and the holders of such piggy-back rights
intend to include in any Shelf Registration Statement is so large as to
materially threaten the success of such offering (including the price at which
such securities can be sold), then the amount, number or kind of securities to
be offered in such registration statement, in addition to the Registrable
Securities, will be reduced on a pro rata basis to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount, number and kind recommended by the Managing Underwriter.
(b) AMENDMENTS AND WAIVERS. This Agreement, including this Section
8(b), may be amended, and waivers or consents to departures from the provisions
hereof may be given, only by a written instrument duly executed by the Company
and the Holders of a majority in aggregate principal amount of Registrable
Securities then outstanding. Each Holder of Registrable Securities outstanding
at the time of any such amendment, waiver or consent or thereafter shall be
bound by any amendment, waiver or consent effected pursuant to this Section
8(b), whether or not any notice, writing or marking indicating such amendment,
waiver or consent appears on the Registrable Securities or is delivered to such
Holder.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture.
(d) PARTIES IN INTEREST. The parties to this Agreement intend that all
Holders of Registrable Securities shall be entitled to receive the benefits of
this Agreement and that any Electing Holder shall be bound by the terms and
provisions of this Agreement by reason of such election with respect to the
Registrable Securities which are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective permitted successors
and assigns of the parties hereto and any Holder from time to time of the
Registrable Securities to the aforesaid extent.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
(j) SURVIVAL. The respective indemnities, agreements, representations,
warranties and other provisions set forth in this Agreement or made pursuant
hereto shall remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of any
Electing Holder, any director, officer or partner of such Holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or
any controlling person of any of the foregoing, and shall survive the transfer
and registration of the Registrable Securities of such Holder.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
XL Capital Ltd
By:
------------------------
Name:
Title:
Accepted as of the date hereof:
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:
-----------------------------------------------
Name:
Title:
EXHIBIT A
XL Capital Ltd
INSTRUCTION TO DTC PARTICIPANTS
(DATE OF MAILING)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]
The Depository Trust Company ("DTC") has identified you as a
DTC Participant through which beneficial interests in the XL Capital Ltd (the
"Company") Liquid Yield Option(TM) Notes due 2021 (the "Securities") are held.
The Company is in the process of registering the Securities
under the Securities Act of 1933, as amended, for resale by the beneficial
owners thereof. In order to have their Securities included in the registration
statement, beneficial owners must complete and return the enclosed Notice of
Registration Statement and Selling Securityholder Questionnaire.
IT IS IMPORTANT THAT BENEFICIAL OWNERS OF THE SECURITIES
RECEIVE A COPY OF THE ENCLOSED MATERIALS AS SOON AS POSSIBLE as their rights to
have the Securities included in the registration statement depend upon their
returning the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please
forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the
enclosed materials or have any questions pertaining to this matter, please
contact Galvin R. Arton, XL Capital Ltd, XL House, One Bermudiana Road,
Hamilton, Bermuda HM11.
XL Capital Ltd
Notice of Registration Statement
and
SELLING SECURITYHOLDER QUESTIONNAIRE
(Date)
Reference is hereby made to the Registration Rights Agreement,
dated September 7, 2001 (the "Registration Rights Agreement") between XL Capital
Ltd (the "Company") and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Pursuant to the Registration Rights Agreement, the Company plans to file with
the United States Securities and Exchange Commission (the "Commission") a
registration statement on Form [__] (the "Shelf Registration Statement") for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended
(the "Securities Act"), of the Company's Liquid Yield Option(TM) Notes due
September ?, 2021 (the "Securities") and the Class A Ordinary Shares, par value
$.01 per share (the "Ordinary Shares"), issuable upon conversion thereof. A copy
of the Registration Rights Agreement is attached hereto. All capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined
below) is entitled to have the Registrable Securities beneficially owned by it
included in the Shelf Registration Statement. In order to have Registrable
Securities included in the Shelf Registration Statement, this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company's
counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR
RESPONSE]. Beneficial owners of Registrable Securities who do not complete,
execute and return this Notice and Questionnaire by such date (i) will not be
named as selling securityholders in the Shelf Registration Statement and (ii)
may not use the Prospectus forming a part thereof for resales of Registrable
Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
The term "REGISTRABLE SECURITIES" is defined in the
Registration Rights Agreement to mean all or any portion of the Securities
issued from time to time under the Indenture in registered form and the Ordinary
Shares issuable upon conversion of such Securities; PROVIDED, HOWEVER, that a
security ceases to be a Registrable Security when it is no longer a Restricted
Security.
The term "RESTRICTED SECURITY" is defined in the Registration
Rights Agreement to mean any Security or Ordinary Share issuable upon conversion
thereof except any such Security or Ordinary Share which (i) has been
effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto), (iii) has been sold in compliance with Regulation
S under the Securities Act (or any successor thereto) and does not constitute
the unsold allotment of a distributor within the meaning of Regulation S under
the Securities Act, (iv) has otherwise been transferred and a new Security or
Ordinary Share not subject to transfer restrictions under the Securities Act has
been delivered by or on behalf of the Company in accordance with Section 2.6(f)
of the Indenture, or (v) is otherwise transferable without restriction under the
Securities Act.
ELECTION
The undersigned holder (the "Selling Securityholder") of
Registrable Securities hereby elects to include in the Shelf Registration
Statement the Registrable Securities beneficially owned by it and listed below
in Item (3). The undersigned, by signing and returning this Notice and
Questionnaire, agrees to be bound with respect to such Registrable Securities by
the terms and conditions of this Notice and Questionnaire and the Registration
Rights Agreement, including, without limitation, Section 5 of the Registration
Rights Agreement, as if the undersigned Selling Securityholder were an original
party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth as Exhibit B to the
Registration Rights Agreement.
The Selling Securityholder hereby provides the following
information to the Company and represents and warrants that such information is
accurate and complete:
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
---------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in (a)
above) of Registrable Securities Listed in Item (3) below:
---------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not the same
as (b) above) Through Which Registrable Securities Listed in Item (3)
below are Held:
---------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
---------------------------------------
---------------------------------------
---------------------------------------
Telephone:
---------------------------------------
Fax:
---------------------------------------
Contact Person:
---------------------------------------
(3) Beneficial Ownership of Securities:
EXCEPT AS SET FORTH BELOW IN THIS ITEM (3), THE UNDERSIGNED DOES NOT
BENEFICIALLY OWN ANY SECURITIES OR ORDINARY SHARES ISSUED UPON
CONVERSION OF ANY SECURITIES.
(a) Principal amount at maturity (subject to upward interest in the event
of an upward interest adjustment) of Registrable Securities (as
defined in the Registration Rights Agreement) beneficially owned:
---------------------------------------------------------------------
CUSIP No(s). of such Registrable Securities:
-------------------------
Number of Ordinary Shares (if any) issued upon conversion of such
Registrable Securities:
----------------------------------------------
(b) Principal amount at maturity (subject to upward interest in the event
of an upward interest adjustment) of Securities other than
Registrable Securities beneficially owned:
---------------------------------------------------------------------
CUSIP No(s). of such other Securities:
-------------------------------
Number of Ordinary Shares (if any) issued upon conversion of such
other Securities:
----------------------------------------------------
(c) Principal amount at maturity (subject to adjustment for Contingent
Additional Principal) of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement:
---------------------------------------------------------------------
CUSIP No(s). of such Registrable Securities to be included in the
Shelf Registration Statement:
----------------------------------------
21
Number of Ordinary Shares (if any) issued upon conversion of
Registrable Securities which are to be included in the Shelf
Registration Statement:
----------------------------------------------
(4) Beneficial Ownership of Other Securities of the Company:
EXCEPT AS SET FORTH BELOW IN THIS ITEM (4), THE UNDERSIGNED SELLING
SECURITYHOLDER IS NOT THE BENEFICIAL OR REGISTERED OWNER OF ANY
ORDINARY SHARES OR ANY OTHER SECURITIES OF THE COMPANY, OTHER THAN
THE SECURITIES AND ORDINARY SHARES LISTED ABOVE IN ITEM (3).
State any exceptions here:
(5) Relationships with the Company:
EXCEPT AS SET FORTH BELOW, NEITHER THE SELLING SECURITYHOLDER NOR ANY
OF ITS AFFILIATES, OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS
(5% OR MORE) HAS HELD ANY POSITION OR OFFICE OR HAS HAD ANY OTHER
MATERIAL RELATIONSHIP WITH THE COMPANY (OR ITS PREDECESSORS OR
AFFILIATES) DURING THE PAST THREE YEARS.
State any exceptions here:
(6) Plan of Distribution:
EXCEPT AS SET FORTH BELOW, THE UNDERSIGNED SELLING SECURITYHOLDER
INTENDS TO DISTRIBUTE THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM
(3) ONLY AS FOLLOWS (IF AT ALL): SUCH REGISTRABLE SECURITIES MAY BE
SOLD FROM TIME TO TIME DIRECTLY BY THE UNDERSIGNED SELLING
SECURITYHOLDER OR, ALTERNATIVELY, THROUGH UNDERWRITERS,
BROKER-DEALERS OR AGENTS. SUCH REGISTRABLE SECURITIES MAY BE SOLD IN
ONE OR MORE TRANSACTIONS AT FIXED PRICES, AT PREVAILING MARKET PRICES
AT THE TIME OF SALE, AT VARYING PRICES DETERMINED AT THE TIME OF
SALE, OR AT NEGOTIATED PRICES. SUCH SALES MAY BE EFFECTED IN
TRANSACTIONS (WHICH MAY INVOLVE CROSSES OR BLOCK TRANSACTIONS) (I) ON
ANY NATIONAL SECURITIES EXCHANGE OR QUOTATION SERVICE ON WHICH THE
REGISTERED SECURITIES MAY BE LISTED OR QUOTED AT THE TIME OF SALE,
(II) IN THE OVER-THE-COUNTER MARKET, (III) IN TRANSACTIONS OTHERWISE
THAN ON SUCH EXCHANGES OR SERVICES OR IN THE OVER-THE-COUNTER MARKET,
OR (IV) THROUGH THE WRITING OF OPTIONS. IN CONNECTION WITH SALES OF
THE REGISTRABLE SECURITIES OR OTHERWISE, THE SELLING SECURITYHOLDER
MAY ENTER INTO HEDGING TRANSACTIONS WITH BROKER-DEALERS, WHICH MAY IN
TURN ENGAGE IN SHORT SALES OF THE REGISTRABLE SECURITIES IN THE
COURSE OF HEDGING THE POSITIONS THEY ASSUME. THE SELLING
SECURITYHOLDER MAY ALSO SELL REGISTRABLE SECURITIES SHORT AND DELIVER
REGISTRABLE SECURITIES TO CLOSE OUT SUCH SHORT POSITIONS, OR LOAN OR
PLEDGE REGISTRABLE SECURITIES TO BROKER-DEALERS THAT IN TURN MAY SELL
SUCH SECURITIES.
State any exceptions here:
Note: In no event may such method(s) of distribution take the
form of an underwritten offering of the Registrable Securities without the prior
agreement of the Company.
By signing below, the Selling Securityholder acknowledges that
it understands its obligation to comply, and agrees that it will comply, with
the provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M.
22
In the event that the Selling Securityholder transfers all or
any portion of the Registrable Securities listed in Item (3) above after the
date on which such information is provided to the Company, the Selling
Securityholder agrees to notify in writing the Company and any transferee(s) at
the time of the transfer of its rights and obligations under this Notice and
Questionnaire and the Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to Items (1)
through (6) above and the inclusion of such information in the Shelf
Registration Statement and related Prospectus. The Selling Securityholder
understands that such information will be relied upon by the Company in
connection with the preparation of the Shelf Registration Statement and related
Prospectus.
In accordance with the Selling Securityholder's obligation
under Section 3(a) of the Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to promptly notify the Company in
writing of any inaccuracies or changes in the information provided herein which
may occur subsequent to the date hereof at any time while the Shelf Registration
Statement remains in effect. All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing, by hand-delivery,
first-class mail, or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
XL Capital Ltd
One Bermudiana Road
Hamilton, Bermuda HM11
(441) 292-8515
Facsimile (441) 292-5280
Attention: Paul S. Giordano
(ii) With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
(212) 701-3000
Facsimile (212) 269-5420
Attention: Micael J. Ohler
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above). This Agreement shall be governed in all respects by the laws of the
State of New York.
23
IN WITNESS WHEREOF, the undersigned, by authority duly given,
has caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
----------------------------
--------------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:
---------------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
-------------------------
-------------------------
-------------------------
-------------------------
-------------------------
24
EXHIBIT B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
State Street Bank and Trust Company
225 Asylum Street
23rd Floor
Hartford, Connecticut 06103
Attention: [Corporate Trust Services]
Re: XL Capital Ltd (the "Company")
Liquid Yield Option(TM) Notes
due 2021 (the "Securities")
Dear Sirs:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount at maturity (subject to adjustment for
Contingent Additional Principal) of the above-referenced Securities pursuant to
an effective Registration Statement on Form [___] (File No. 333-____) filed by
the Company.
We hereby certify that the prospectus delivery requirements,
if any, of the Securities Act of 1933, as amended, have been satisfied and that
the above-named beneficial owner of the Notes is named as a "Selling Holder" in
the Prospectus dated _______, or in supplements thereto, and that the aggregate
principal amount at maturity (subject to upward adjustment in the event of an
upward interest adjustment) of the Securities transferred are the Securities
listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
------------------------
(Name)
By:
------------------------
(Authorized Signature)
25
EX-10.44
6
c22070_ex10-44.txt
AMENDED AND RESTATED CREDIT AGREEMENT
Exhibit 10.44
EXECUTION COUNTERPART
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of September 26, 2001, between XL
CAPITAL LTD, a company incorporated under the laws of the Cayman Islands,
British West Indies ("XL CAPITAL"), XL INSURANCE LTD, a Bermuda limited
liability company ("XL INSURANCE"), MID OCEAN LIMITED, a corporation duly
organized and validly existing under the laws of the Cayman Islands, British
West Indies ("MID OCEAN") and XL RE, LTD (formerly known as XL MID OCEAN
REINSURANCE LTD), a Bermuda limited liability company ("XL RE" and, together
with XL Capital, XL Insurance and Mid Ocean, each a "BORROWER" and each a
"GUARANTOR" and, collectively, the "BORROWERS" and the "GUARANTORS"; the
Borrowers and the Guarantors being collectively referred to as the "OBLIGORS"),
the BANKS party hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent.
The Obligors, the Banks and the Administrative Agent are
parties to an Amended and Restated Credit Agreement dated as of August 31, 2001
(the "CREDIT AGREEMENT"), providing, subject to the terms and conditions
thereof, for loans to be made by said Banks to the Borrowers in an aggregate
principal amount not exceeding $100,000,000. The Obligors, the Banks and the
Administrative Agent wish to amend the Credit Agreement in certain respects and
accordingly the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. AMENDMENTS. Effective as provided in Section 4
below, the Credit Agreement is hereby amended as follows:
2.01. References in the Credit Agreement (including references
to the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. Clause (b) of Section 8.04 is hereby amended to read in
its entirety as follows:
"(b) NO MATERIAL ADVERSE CHANGE. Since December 31, 2000,
there has been no material adverse change in the assets, business,
financial condition or operations of such Borrower and its
Subsidiaries, taken as a whole, except for losses caused by or relating
to or arising out of the terrorist events of September 11, 2001;
PROVIDED, HOWEVER, that XL Capital remains in compliance with Section
9.17."
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
2.03. Section 9.17 of the Credit Agreement is hereby amended
to read in its entirety as follows:
"9.17 CONSOLIDATED NET WORTH. XL Capital will not permit its
Consolidated Net Worth to be less than $4,250,000,000."
Section 3. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby
represents and warrants to the Administrative Agent and the Banks that (i) the
representations and warranties set forth in Section 8 of the Credit Agreement
are, on the date hereof, true and complete as if made on the date hereof (and
after giving effect to this Amendment No. 1) and as if each reference in said
Section 8 to "this Agreement" includes reference to this Amendment No. 1 and
(ii) both immediately prior to and as of the date hereof, no Default has
occurred and is continuing.
Section 4. CONDITIONS PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 above shall become effective, as of the date
hereof, upon the satisfaction of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 shall
have been executed and delivered by each of the Obligors and the Majority Banks.
4.02. AMENDMENT FEE. The Administrative Agent shall have
received for the account of each Bank that consents to this Amendment No. 1
(evidenced by receipt by the Administrative Agent of an executed counterpart of
this Amendment No. 1) an amendment fee in an amount equal to 0.03% of the sum of
outstanding Loans and unused Commitments of each such Bank.
4.03. OTHER DOCUMENTS. Receipt by the Administrative Agent of
such other documents as the Administrative Agent or special New York counsel to
Chase may reasonably request.
Section 5. MISCELLANEOUS. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. Nothing in
this Amendment No. 1 shall constitute a waiver of any rights and/or remedies
that the Banks and/or the Administrative Agent may have under the Credit
Agreement and nothing contained herein shall obligate the Banks to grant any
future waiver of any provision of the Credit Agreement. XL Capital shall pay all
reasonable expenses incurred by the Administrative Agent, including the
reasonable fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel to Chase, in connection with the preparation,
negotiation, execution and delivery of this Amendment No. 1. This Amendment No.
1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and year first
above written.
XL INSURANCE LTD,
as a Borrower and a Guarantor
By /s/ CHRIS COELHO
--------------------------------------------
Name: Chris Coehlo
Title: Chief Financial Officer
MID OCEAN LIMITED,
as a Borrower and a Guarantor
By /s/ HENRY C. V. KEELING
--------------------------------------------
Name: Henry C. V. Keeling
Title: President
XL RE LTD, (formerly known as MID
OCEAN REINSURANCE LTD),
as a Borrower and a Guarantor
By /s/ HENRY C. V. KEELING
--------------------------------------------
Name: Henry C. V. Keeling
Title: President & Chief Executive Officer
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
IN WITNESS WHEREOF, XL Capital has caused this Amendment No. 1
to be duly executed as a Deed by an authorized officer as of the day and year
first above written.
EXECUTED AS A DEED by XL CAPITAL LTD,
as a Borrower and a Guarantor
/s/ PAUL GIORDANO
--------------------------------------------
witness
By /s/ MICHAEL SIESE
------------------------------------------
Name: Michael Siese
Title: Senior Vice President & Controller
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
BANKS
THE CHASE MANHATTAN BANK, Individually
and as Administrative Agent
By /s/ HELEN L. NEWCOMB
----------------------------------------------
Title: Vice President
CITIBANK N.A.
By: /s/ MICHAEL TAYLOR
----------------------------------------------
Title: VP
By:
----------------------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By: /s/ RUTH LEUNG
----------------------------------------------
Title: Ruth Leung - Director
By: /s/ CLINTON M. JOHNSON
----------------------------------------------
Title: Clinton M. Johnson - Managing Director
MELLON BANK, N.A.
By: /s/ KARLA K. MALOOF
----------------------------------------------
Title: Vice President
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
ROYAL BANK OF CANADA
By
--------------------------------
Title:
THE BANK OF BERMUDA LIMITED
By: /s/ A. KERRY DAVISON
--------------------------------
Title: VP - Credit Manager -
Corporate Cash Management
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ KEN RICCIARDI
-----------------------------------------
Title: VP
STATE STREET BANK AND TRUST COMPANY
By: /s/ EDWARD M. ANDERSON
-----------------------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS
By
--------------------------------
_ Title:
By
--------------------------------
Title:
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
THE BANK OF NOVA SCOTIA NY AGENCY
By: /s/ TODD MELLER
--------------------------------
Title: Managing Director
AMENDMENT NO. 1 TO CREDIT AGREEMENT (5-YEAR)
EX-10.45
7
c22070_ex10-45.txt
364-DAY CREDIT AGREEMENT
Exhibit 10.45
EXECUTION COUNTERPART
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of September 26, 2001, between XL
CAPITAL LTD, a company incorporated under the laws of the Cayman Islands,
British West Indies ("XL CAPITAL"), X.L. AMERICA, INC., a Delaware corporation
("XL AMERICA"), XL INSURANCE LTD, a Bermuda limited liability corporation ("XL
INSURANCE"), XL EUROPE LTD, a company incorporated under the laws of Ireland
("XL EUROPE") and XL RE LTD, a Bermuda limited liability corporation ("XL RE"
and, together with XL Capital, XL America, XL Insurance and XL Europe, each a
"BORROWER" and each a "GUARANTOR" and, collectively, the "BORROWERS" and the
"GUARANTORS"; the Borrowers and the Guarantors being collectively referred to as
the "OBLIGORS"), each of the lenders that is a signatory hereto (individually, a
"LENDER" and, collectively, the "LENDERS"), and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "ADMINISTRATIVE AGENT").
The Obligors, the Lenders and the Administrative Agent are
parties to a 364-Day Credit Agreement dated as of June 29, 2001 (the "CREDIT
AGREEMENT"), providing, subject to the terms and conditions thereof, for loans
to be made by said Lenders to the Borrowers in an aggregate principal amount not
exceeding $500,000,000. The Obligors, the Lenders and the Administrative Agent
wish to amend the Credit Agreement in certain respects and accordingly the
parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. AMENDMENTS. Effective as provided in Section 4
below, the Credit Agreement is hereby amended as follows:
2.01. References in the Credit Agreement (including references
to the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. Clause (b) of Section 4.04 is hereby amended to read in
its entirety as follows:
"(b) NO MATERIAL ADVERSE CHANGE. Since December 31, 2000,
there has been no material adverse change in the assets, business,
financial condition or operations of such Borrower and its
Subsidiaries, taken as a whole, except for losses caused by or relating
to or arising out of the terrorist events of September 11, 2001;
PROVIDED, HOWEVER, that XL Capital remains in compliance with Section
7.06."
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
2.03. Section 7.06 of the Credit Agreement is hereby amended
to read in its entirety as follows:
"SECTION 7.06. CONSOLIDATED NET WORTH. XL Capital will not
permit its Consolidated Net Worth to be less than $4,250,000,000."
Section 3. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby
represents and warrants to the Administrative Agent and the Lenders that (i) the
representations and warranties set forth in Article IV of the Credit Agreement
are, on the date hereof, true and complete as if made on the date hereof (and
after giving effect to this Amendment No. 1) and as if each reference in said
Article IV to "this Agreement" includes reference to this Amendment No. 1 and
(ii) both immediately prior to and as of the date hereof, no Default has
occurred and is continuing.
Section 4. CONDITIONS PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 above shall become effective, as of the date
hereof, upon the satisfaction of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 shall
have been executed and delivered by each of the Obligors and the Required
Lenders.
4.02. AMENDMENT FEE. The Administrative Agent shall have
received for the account of each Lender that consents to this Amendment No. 1
(evidenced by receipt by the Administrative Agent of an executed counterpart of
this Amendment No. 1) an amendment fee in an amount equal to 0.03% of the sum of
Revolving Credit Exposures and unused Commitments of each such Lender.
4.03. OTHER DOCUMENTS. Receipt by the Administrative Agent of
such other documents as the Administrative Agent or special New York counsel to
Chase may reasonably request.
Section 5. MISCELLANEOUS. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. Nothing in
this Amendment No. 1 shall constitute a waiver of any rights and/or remedies
that the Lenders and/or the Administrative Agent may have under the Credit
Agreement and nothing contained herein shall obligate the Lenders to grant any
future waiver of any provision of the Credit Agreement. XL Capital shall pay all
reasonable expenses incurred by the Administrative Agent, including the
reasonable fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel to Chase, in connection with the preparation,
negotiation, execution and delivery of this Amendment No. 1. This Amendment No.
1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and year first
above written.
X.L. AMERICA, INC.,
as a Borrower and a Guarantor
By /s/ MARTHA BANNERMAN
------------------------------------------
Name: Martha Bannerman
Title: Executive Vice President & General
Counsel
XL INSURANCE LTD,
as a Borrower and a Guarantor
By /s/ CHRIS COELHO
------------------------------------------
Name: Chris Coehlo
Title: Chief Financial Officer
XL EUROPE LTD,
as a Borrower and a Guarantor
By /s/ FIONA MULDOON
------------------------------------------
Name: Fiona Muldoon
Title: Chief Financial Officer
and Company Secretary
XL RE LTD,
as a Borrower and a Guarantor
By /s/ HENRY C. V. KEELING
------------------------------------------
Name: Henry C. V. Keeling
Title: President & Chief Executive Officer
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
IN WITNESS WHEREOF, XL Capital has caused this Amendment No. 1
to be duly executed as a Deed by an authorized officer as of the day and year
first above written.
EXECUTED AS A DEED by XL CAPITAL LTD,
as a Borrower and a Guarantor
/s/ PAUL GIORDANO
---------------------------------------------
witness
By /s/ MICHAEL SIESE
------------------------------------------
Name: Michael Siese
Title: Senior Vice President & Controller
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
LENDERS
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By /s/ HELEN L. NEWCOMB
-----------------------------------------
Name: Helen L. Newcomb
Title: Vice President
CITIBANK, N.A.
By: /s/ MICHAEL A. TAYLOR
-----------------------------------------
Name: Michael A. Taylor
Title: Vice President
MELLON BANK, N.A.
By: /s/ KARLA K. MALOOF
-----------------------------------------
Name: Karla K. Maloof
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ DEBRA BASLER
-----------------------------------------
Name: Debra Basler
Title: Vice President
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
BANK ONE, NA
By: /s/ GRETCHEN ROETZER
---------------------------------
Name: Gretchen Roetzer
Title: Assistant Vice President
BARCLAYS BANK PLC
By: /s/ RP JOHNSON
--------------------------------
Name: RP Johnson
Title: Relationship Director
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ KEN RICCIARDI
--------------------------------
Name: Ken Ricciardi
Title: VP
DEUTSCHE BANK AG
By: /s/ RUTH LEUNG
--------------------------------
Name: Ruth Leung
Title: Director
By: /s/ CLINTON JOHNSON
--------------------------------
Name: Clinton Johnson
Title: Managing Director
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ JONATHAN WALLIN
--------------------------------
Name: Jonathan Wallin
Title: Vice President
By: /s/ ERIKA WALTEB-ENGEMANN
--------------------------------
Name: Erika Walteb-Engemann
Title: Director
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
FLEET NATIONAL BANK
By: /s/ LAWRENCE DOWNS
---------------------------------------
Name: Lawrence Downs
Title: Associate
LLOYDS TSB BANK PLC
By: /s/ MICHAEL GILLIGAN
-------------------------------------------
Name: Michael Gilligan
Title: Director, Financial Institutions, USA
By: /s/ PAUL D. BRIAMONTE
-------------------------------------------
Name: Paul D. Briamonte
Title: Director
THE BANK OF BERMUDA LIMITED
By: /s/ A. KERRY DAVISON
-------------------------------------------
Name: A. Kerry Davidson
Title: VP - Credit Manager,
Corporate Cash Management
By: /s/ MICHAEL COLLINS
-------------------------------------------
Name: Michael Collins
Title: Head of Corporate Cash Management
ABN AMRO BANK N.V., LONDON BRANCH
By: /s/ DW MILLS
-------------------------------------------
Name: DW Mills
Title:
By: /s/ MARTYN TAPLIN
-------------------------------------------
Name: Martyn Taplin
Title:
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
BANCO SANTANDER CENTRAL HISPANO, S.A.
By: /s/ PHIL PERRY
---------------------------------------
Name: Phil Perry
Title: Senior Vice President
By: /s/ SEN LOUIE
---------------------------------------
Name: Sen Louie
Title: Assistant Vice President
COMERICA BANK
By: /s/ MARTIN G. ELLIS
---------------------------------------
Name: Martin G. Ellis
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ DANIEL J. NORTON
---------------------------------------
Name: Daniel J. Norton
Title: Director
NATIONAL WESTMINSTER BANK PLC
By: /s/
---------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By: /s/ EDWARD M. ANDERSON
---------------------------------------
Name: Edward M. Anderson
Title: Vice President
AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT
EX-10.46
8
c22070_ex10-46.txt
SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
Exhibit 10.46
*
CONFORMED COPY
SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, dated as
of September 26, 2001 (this "Amendment"), by and among XL Insurance Ltd, XL Re
Ltd (formerly known as XL Mid Ocean Reinsurance Ltd), EXEL Acquisition Ltd. and
XL Capital Ltd, as Guarantors and, except in the case of EXEL Acquisition, as
Borrowers (the Guarantors and the Borrowers being referred to herein
collectively as the "XL Parties"), Mellon Bank, N.A., as Agent (the "Agent"),
and the banks listed on the signature pages hereto (collectively, the "Banks").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the XL Parties, the Banks, and the Agent are parties
to a Revolving Credit Agreement, dated as of June 6, 1997, (as amended by the
First Amendment thereto, dated as of November 5, 1997, the Second Amendment
thereto, dated as of August 3, 1998, the Third Amendment thereto, dated as of
December 4, 1998, the Fourth Amendment thereto, dated as of June 30, 1999, the
Fifth Amendment thereto, dated as of February 25, 2000, and the Sixth Amendment
thereto, dated as of August 27, 2001, the "Credit Agreement"), pursuant to which
the Banks have agreed, on the terms and subject to the conditions described
therein, to make, and have made, Loans to the Borrowers; and
WHEREAS, the XL Parties have requested the Banks to make
certain additional changes to the Credit Agreement; and
WHEREAS, the Banks are willing to amend the Credit Agreement
as set forth below; and
WHEREAS, capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Credit Agreement;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
(a) Section 6.06 of the Credit Agreement is hereby amended to
read in its entirety as follows:
6.06. CONSOLIDATED NET WORTH. XL Capital will not
permit its Consolidated Net Worth to be less than
$4,250,000,000 at any time.
(b) Section 3.05 of the Credit Agreement is hereby amended to
read in its entirety as follows:
3.05. NO ADVERSE CHANGES. Since November 30, 1996,
there has been no occurrence or event which has had a
Material Adverse Effect, except (insofar as clause (a) of
the definition of the term "Material Adverse Effect is
concerned) for losses caused by or relating to or arising
out of the terrorist events of September 11, 2001;
PROVIDED, however, that XL Capital remains in compliance
with Section 6.06.
SECTION 2. EFFECTIVENESS. This Amendment shall become
effective upon the satisfaction of the following conditions precedent: (i) this
Amendment shall have been executed and delivered by the XL Parties, the Agent
and the Required Banks and (ii) the Agent shall have received for the account of
each Bank which shall have consented to this Amendment (evidenced by receipt by
the Agent of an executed counterpart of this Amendment) an amendment fee in an
amount equal to 0.03% of the
Seventh Amendment to Revolving Credit Agreement (XL)
-2-
Committed Amount of such Bank. XL Capital agrees to pay such amendment fee to
each Bank which consents to this Amendment (so evidenced) whether the
counterpart of this Amendment signed by such Bank is received by the Agent
before or after this Amendment becomes effective.
SECTION 3. MISCELLANEOUS. The Credit Agreement, as amended by
this Amendment, is in all respects ratified, approved and confirmed and shall,
as so amended, remain in full force and effect. Nothing in this Amendment shall
constitute a waiver of any rights or remedies that the Banks or the Agent may
have under the Credit Agreement and nothing contained herein shall obligate the
Banks to grant any future waiver of any provision of the Credit Agreement. XL
Capital shall pay all reasonable expenses incurred by the Agent, including the
reasonable fees, charges and disbursements of Reed Smith LLP, counsel for the
Agent, in connection with the preparation, negotiation, execution and delivery
of this Amendment. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
SECTION 4. GOVERNING LAW. This Amendment shall be deemed to be
a contract under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be governed by and construed and enforced in accordance with the
laws of said Commonwealth.
Seventh Amendment to Revolving Credit Agreement (XL)
-3-
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
XL INSURANCE LTD,
as a Borrower and as a Guarantor
By: /s/ CHRISTOPHER COELHO
------------------------------------
Title: SENIOR VICE PRESIDENT & CFO
XL RE LTD (formerly known as XL MID
OCEAN REINSURANCE LTD),
as a Borrower and as a Guarantor
By: /s/ HENRY KEELING
------------------------------------
Title: PRESIDENT & CEO
EXEL ACQUISITION LTD.,
as a Guarantor
By: /s/ BRIAN O'HARA
------------------------------------
Title: PRESIDENT
XL CAPITAL LTD, as a Borrower and
as a Guarantor
By: /s/ BRIAN O'HARA
------------------------------------
Title: PRESIDENT & CEO
Seventh Amendment to Revolving Credit Agreement (XL)
-4-
MELLON BANK, N.A., as a Bank
and as Agent
By: /s/ KARLA K. MALOOF
----------------------------------
Title: VICE PRESIDENT
BANK OF TOKYO - MITSUBISHI LTD.,
as a Bank
By:
----------------------------------
Title:
-------------------------------
DEUTSCHE BANK AG, NEW YORK OR
CAYMAN ISLANDS BRANCHES,
as a Bank
By: /s/ RUTH LEUNG
----------------------------------
Title: DIRECTOR
By: /s/ CLINTON M. JOHNSON
----------------------------------
Title: MANAGING DIRECTOR
THE BANK OF NOVA SCOTIA,
as a Bank
By: /s/ TODD MELLER
----------------------------------
Title: MANAGING DIRECTOR
Seventh Amendment to Revolving Credit Agreement (XL)
-5-
THE CHASE MANHATTAN BANK,
as a Bank
By: /s/ HELEN L. NEWCOMB
---------------------------------------
Title: VICE PRESIDENT
THE BANK OF BERMUDA LIMITED,
as a Bank
By: /s/ A. KERRY DAVISON
---------------------------------------
Title: V.P. CREDIT MANAGER,
------------------------------
CORPORATE CASH MANAGEMENT
ROYAL BANK OF CANADA,
as a Bank
By:
---------------------------------------
Title:
------------------------------------
BANQUE NATIONALE DE PARIS,
as a Bank
By:
---------------------------------------
Title:
------------------------------------
By:
---------------------------------------
Title:
------------------------------------
Seventh Amendment to Revolving Credit Agreement (XL)
-6-
BANK OF AMERICA, N. A.,
as a Bank
By: /s/ DEBRA BASLER
----------------------------------------
Title: VICE PRESIDENT
CREDIT LYONNAIS NEW YORK BRANCH,
as a Bank
By: /s/ KEN RICCIARDI
----------------------------------------
Title: VICE PRESIDENT
By:
----------------------------------------
Title:
-------------------------------------
BAYERISCHE HYPO- UND VEREINSBANK AG,
Grand Cayman Branch, as a Bank
By: /s/ DEBRA LASKOWSKI
----------------------------------------
Title: MANAGING DIRECTOR
By: /s/ MICHAEL F. DAVIS
----------------------------------------
Title: DIRECTOR
FLEET NATIONAL BANK, as a Bank
By:
----------------------------------------
Title:
-------------------------------------
Seventh Amendment to Revolving Credit Agreement (XL)
-7-
EX-10.47
9
c22070_ex10-47.txt
SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
Exhibit 10.47
* CONFORMED COPY
SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, dated as
of August 27, 2001 (this "Amendment"), by and among XL Insurance Ltd, XL Re Ltd
(formerly known as XL Mid Ocean Reinsurance Ltd), EXEL Acquisition Ltd. and XL
Capital Ltd, as Guarantors and, except in the case of EXEL Acquisition, as
Borrowers (the Guarantors and the Borrowers being referred to herein
collectively as the "XL Parties"), Mellon Bank, N.A., as Agent (the "Agent"),
and the banks listed on the signature pages hereto (collectively, the "Banks").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the XL Parties, the Banks, and the Agent are parties
to a Revolving Credit Agreement, dated as of June 6, 1997, (as amended by the
First Amendment thereto, dated as of November 5, 1997, the Second Amendment
thereto, dated as of August 3, 1998, the Third Amendment thereto, dated as of
December 4, 1998, the Fourth Amendment thereto, dated as of June 30, 1999 and
the Fifth Amendment thereto, dated as of February 25, 2000, the "Credit
Agreement"), pursuant to which the Banks have agreed, on the terms and subject
to the conditions described therein, to make Loans to the Borrowers; and
WHEREAS, the XL Parties have requested the Banks to make
certain additional changes to the Credit Agreement; and
WHEREAS, the Banks are willing to amend the Credit Agreement
as set forth below; and
WHEREAS, capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Credit Agreement;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
(a) Each of Article V and Article VI of the Credit Agreement
is hereby amended and restated in their entirety to read as set forth on Annex I
to this Amendment.
(b) Section 1.01 of the Credit Agreement is hereby amended
by adding thereto, in appropriate alphabetical sequence, the following
definitions:
"Default" means any event or condition which constitutes
an Event of Default or which upon notice, lapse of time
or both would, unless cured or waived, become an Event of
Default.
"Financial Officer" means, with respect to any Obligor,
a principal financial officer of such Obligor.
"Obligor" means each of the Borrowers and each of the
Guarantors.
"SEC" means the Securities and Exchange Commission or
any successor entity.
"XL Mid Ocean" and "XL Re" shall mean XL Re Ltd,
formerly known as XL Mid Ocean Reinsurance Ltd.
(c) Section 1.01 of the Credit Agreement is hereby amended by
deleting the respective definitions of the terms "Asset Accumulation Lien" and
"Total Adjusted Funded Debt" appearing therein.
Sixth Amendment to Revolving Credit Agreement (XL)
-2-
(d) The Credit Agreement is hereby amended by deleting
Schedules 6.03(a), 6.03(g) and 6.08(d).
(e) The Credit Agreement is hereby amended by adding thereto
a Schedule 6.03 in the form attached to this Amendment as Annex II.
(f) The Credit Agreement is hereby amended by adding thereto
a Schedule 6.07 in the form attached to this Amendment as Annex III.
SECTION 2. EFFECTIVENESS; EFFECT OF AMENDMENT. This Amendment
shall become effective upon execution and delivery hereof by the XL Parties, the
Agent and the Required Banks. The Credit Agreement, as amended by this
Amendment, is in all respects ratified, approved and confirmed and shall, as so
amended, remain in full force and effect.
SECTION 3. GOVERNING LAW. This Amendment shall be deemed to be
a contract under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be governed by and construed and enforced in accordance with the
laws of said Commonwealth.
SECTION 4. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
Sixth Amendment to Revolving Credit Agreement (XL)
-3-
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
XL INSURANCE LTD,
as a Borrower and as a Guarantor
By:/s/ PAUL S. GIORDANO
-----------------------------------
Title: EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL & SECRETARY
XL RE LTD (formerly known as XL MID
OCEAN REINSURANCE LTD),
as a Borrower and as a Guarantor
By: /s/ PAUL S. GIORDANO
-----------------------------------
Title: EXECUTIVE VICE PRESIDENT
GENERAL COUNSEL & SECRETARY
EXEL ACQUISITION LTD.,
as a Guarantor
By: /s/ PAUL S. GIORDANO
-----------------------------------
Title: SECRETARY & DIRECTOR
XL CAPITAL LTD, as a Borrower and
as a Guarantor
By: /s/ PAUL S. GIORDANO
-----------------------------------
Title: EXECUTIVE VICE PRESIDENT
GENERAL COUNSEL & SECRETARY
Sixth Amendment to Revolving Credit Agreement (XL)
-4-
MELLON BANK, N.A., as a Bank
and as Agent
By: /s/ KARLA K. MALOOF
---------------------------------
Title: VICE PRESIDENT
BANK OF TOKYO - MITSUBISHI LTD.,
as a Bank
By:
--------------------------------
Title:
-----------------------------
DEUTSCHE BANK AG, NEW YORK OR
CAYMAN ISLANDS BRANCHES,
as a Bank
By: /s/ CLINTON JOHNSON
--------------------------------
Title: MANAGING DIRECTOR
By: /s/ RUTH LEUNG
--------------------------------
Title: DIRECTOR
THE BANK OF NOVA SCOTIA,
as a Bank
By:
--------------------------------
Title:
--------------------------------
Sixth Amendment to Revolving Credit Agreement (XL)
-5-
THE CHASE MANHATTAN BANK,
as a Bank
By: /s/ HELEN L. NEWCOMB
----------------------------------
Title: VICE PRESIDENT
THE BANK OF BERMUDA LIMITED,
as a Bank
By: /s/ A. KERRY DAVISON
----------------------------------
Title: VICE PRESIDENT, Credit Manager
ROYAL BANK OF CANADA,
as a Bank
By: /s/ ALEXANDER BIRR
----------------------------------
Title: SENIOR MANAGER
BANQUE NATIONALE DE PARIS,
as a Bank
By:
----------------------------------
Title:
-------------------------------
By:
----------------------------------
Title:
-------------------------------
Sixth Amendment to Revolving Credit Agreement (XL)
-6-
BANK OF AMERICA, N. A.,
as a Bank
By: /s/ DEBRA BASLER
-----------------------------------
Title: VICE PRESIDENT
CREDIT LYONNAIS NEW YORK BRANCH,
as a Bank
By: /s/ PETER RASMUSSEN
-----------------------------------
Title: FIRST VICE PRESIDENT
By:
-----------------------------------
Title:
--------------------------------
HYPOVEREINSBANK, as a Bank
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
FLEET NATIONAL BANK, as a Bank
By: /s/ ANSON HARRIS
-----------------------------------
Title: DIRECTOR
Sixth Amendment to Revolving Credit Agreement (XL)
-7-
Annex I to Sixth Amendment
ARTICLE V
AFFIRMATIVE COVENANTS
Until the commitments of the Banks under Section 2.01 hereof
to make Loans have expired or been terminated and the principal of and interest
on each Loan and all fees payable hereunder shall have been paid in full, the
Borrowers covenant and agree with the Banks that:
5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION.
Each Borrower will furnish to the Agent and each Bank:
(a) within 135 days after the end of each fiscal year of such
Borrower (but in the case of XL Capital, within 100 days after the end of each
fiscal year of XL Capital), the audited consolidated balance sheet and related
statements of operations, stockholders' equity and cash flows of such Borrower
and its consolidated Subsidiaries as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year
(if such figures were already produced for such corresponding period or periods)
(it being understood that delivery to the Banks of XL Capital's Report on Form
10-K filed with the SEC shall satisfy the financial statement delivery
requirements of this paragraph (a) to deliver the annual financial statements of
XL Capital so long as the financial information required to be contained in such
Report is substantially the same as the financial information required under
this paragraph (a)), all reported on by PricewaterhouseCoopers LLP or other
independent public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of such Borrower and its consolidated
Subsidiaries on
a consolidated basis in accordance with GAAP or (in the case of XL Insurance and
XL Re) SAP, as the case may be, consistently applied;
(b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year of such Borrower, the consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
of such Borrower and its consolidated Subsidiaries as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for (or, in the case of the balance
sheet, as of the end of) the corresponding period or periods of the previous
fiscal year (if such figures were already produced for such corresponding period
or periods), all certified by a Financial Officer of such Borrower as presenting
fairly in all material respects the financial condition and results of
operations of such Borrower and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP or (in the case of XL Insurance and XL Re) SAP, as
the case may be, consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes (it being understood that delivery to
the Banks of XL Capital's Report on Form 10-Q filed with the SEC shall satisfy
the financial statement delivery requirements of this paragraph (b) to deliver
the quarterly financial statements of XL Capital so long as the financial
information required to be contained in such Report is substantially the same as
the financial information required under this paragraph (b));
(c) concurrently with any delivery of financial statements
under clause (a) or (b) of this Section, a certificate signed on behalf of each
Borrower by a Financial Officer (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections 6.03,
6.05, 6.06 and 6.07 and (iii) stating whether any change in GAAP or (in the case
of XL
-2-
Insurance and XL Re) SAP or in the application thereof has occurred since
the date of the audited financial statements referred to in Section 3.03 and, if
any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate;
(d) concurrently with any delivery of financial statements
under clause (a) of this Section, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained knowledge
during the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by accounting
rules or guidelines);
(e) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
such Borrower or any of its respective Subsidiaries with the SEC, or any
Official Body succeeding to any or all of the functions of the SEC, or with any
U.S. or other securities exchange, or distributed by such Borrower to its
shareholders generally, as the case may be;
(f) concurrently with any delivery of financial statements
under clause (a) or (b) of this Section, a certificate of a Financial Officer of
XL Capital, setting forth on a consolidated basis for XL Capital and its
consolidated Subsidiaries as of the end of the fiscal year or quarter to which
such certificate relates (i) the aggregate book value of assets which are
subject to Liens permitted under Section 6.03(g) and the aggregate book value of
liabilities which are subject to Liens permitted under Section 6.03(g) (it being
understood that the reports required by paragraphs (a) and (b) of this Section
shall satisfy the requirement of this clause (i) of this paragraph (f) if such
reports set forth separately, in accordance with GAAP, line items corresponding
to such aggregate book values) and (ii) a calculation showing the portion of
each of such aggregate amounts which portion is attributable to transactions
among wholly-owned Subsidiaries of XL Capital; and
-3-
(g) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of XL Capital or any of its Subsidiaries, or compliance with the terms of this
Agreement, as the Agent or any Bank may reasonably request.
5.02. NOTICES OF MATERIAL EVENTS. Each Borrower will furnish
to the Agent and each Bank prompt written notice of the following:
(a) the occurrence of any Default; and
(b) any event or condition constituting, or which could
reasonably be expected to have, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the relevant Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken by such Borrower with respect thereto.
5.03. PRESERVATION OF EXISTENCE AND FRANCHISES. Each Borrower
will, and will cause each of its Subsidiaries to, maintain its corporate
existence and its material rights and franchises in full force and effect in its
jurisdiction of incorporation; PROVIDED that the foregoing shall not prohibit
any merger or consolidation permitted under Section 6.01. Each Borrower will,
and will cause each of its Subsidiaries to, qualify and remain qualified as a
foreign corporation in each jurisdiction in which failure to receive or retain
such qualification would have a Material Adverse Effect.
5.04. INSURANCE. Each Borrower will, and will cause each of
its Subsidiaries to, maintain with financially sound and reputable insurers,
insurance with respect to its properties in such amounts as is customary in the
case of corporations engaged
-4-
in the same or similar businesses having similar properties similarly situated.
5.05. MAINTENANCE OF PROPERTIES. Each Borrower will, and will
cause each of its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by and used or useful in its business and will
make or cause to be made all needful and proper repairs, renewals, replacements
and improvements thereto so that the business carried on in connection therewith
may be properly conducted at all times except if the failure to do so would not
have a Material Adverse Effect; PROVIDED, HOWEVER, that the foregoing shall not
impose on such Borrower or any Subsidiary of such Borrower any obligation in
respect of any property leased by such Borrower or such Subsidiary in addition
to such Borrower's obligations under the applicable document creating such
Borrower's or such Subsidiary's lease or tenancy.
5.06. PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES AND
PRIORITY CLAIMS; PAYMENT OF OTHER CURRENT LIABILITIES. Each Borrower will, and
will cause each of its Subsidiaries to, pay or discharge:
(a) on or prior to the date on which penalties attach thereto,
all taxes, assessments and other governmental charges or levies imposed upon it
or any of its properties or income;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like Persons
which, if unpaid, might result in the creation of a Lien upon any such property;
and
(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such property
(other than Liens not forbidden by Section 6.03) or which, if unpaid, might give
rise to a claim entitled to priority over general creditors of such Borrower in
any proceeding under the Bermuda Companies Law or Bermuda Insurance
-5-
Law, or any insolvency proceeding, liquidation, receivership, rehabilitation,
dissolution or winding-up involving such Borrower or such Subsidiary;
PROVIDED that, unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, such Borrower need not pay or discharge
any such tax, assessment, charge, levy or claim so long as the validity thereof
is contested in good faith and by appropriate proceedings diligently conducted
and so long as such reserves or other appropriate provisions as may be required
by GAAP or SAP, as the case may be, shall have been made therefor and so long as
such failure to pay or discharge does not have a Material Adverse Effect.
5.07. FINANCIAL ACCOUNTING PRACTICES. Such Borrower will, and
will cause each of its consolidated Subsidiaries to, make and keep books,
records and accounts which, in reasonable detail, accurately and fairly reflect
its transactions and dispositions of its assets and maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
transactions are recorded as necessary to permit preparation of financial
statements required under Section 5.01 in conformity with GAAP and SAP, as
applicable, and to maintain accountability for assets.
5.08. COMPLIANCE WITH APPLICABLE LAWS. Each Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable Laws
(including but not limited to the Bermuda Companies Law and Bermuda Insurance
Laws) in all respects; PROVIDED that such Borrower or any Subsidiary of such
Borrower will not be deemed to be in violation of this Section as a result of
any failure to comply with any such Law which would not (i) result in fines,
penalties, injunctive relief or other civil or criminal liabilities which, in
the aggregate, would have a Material Adverse Effect or (ii) otherwise impair the
ability of such Borrower to perform its obligations under this Agreement.
-6-
5.09. USE OF PROCEEDS. Each Borrower will use the proceeds
of all Loans for its general corporate purposes (which may include funding
acquisitions, paying dividends and repurchasing securities).
5.10. CONTINUATION OF AND CHANGE IN BUSINESSES. Each Borrower
and its Subsidiaries will continue to engage in substantially the same business
or businesses it engaged in (or proposes to engage in) on the date of this
Agreement and businesses related or incidental thereto.
5.11. VISITATION. Each Borrower will permit such Persons as
any Bank may reasonably designate to visit and inspect any of the properties of
such Borrower, to discuss its affairs with its financial management, and provide
such other information relating to the business and financial condition of such
Borrower at such times as such Bank may reasonably request. Each Borrower hereby
authorizes its financial management to discuss with any Bank the affairs of such
Borrower.
ARTICLE VI
NEGATIVE COVENANTS
Until the commitments of the Banks under Section 2.01 hereof
to make Loans have expired or terminated and the principal of and interest on
each Loan and all fees payable hereunder have been paid in full, each of the
Borrowers covenants and agrees with the Banks that:
6.01. MERGERS. No Borrower will merge with or into or
consolidate with any other Person, except that if no Default shall occur and be
continuing or shall exist at the time of such merger or consolidation or
immediately thereafter and after giving effect thereto any Borrower may merge or
consolidate with any other corporation, including a Subsidiary, if such Borrower
shall be the surviving corporation.
-7-
6.02. DISPOSITIONS. No Borrower will, nor will it permit any
of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise
transfer or dispose of, voluntarily or involuntarily (any of the foregoing being
referred to in this Section as a "Disposition" and any series of related
Dispositions constituting but a single Disposition), any of its properties or
assets, tangible or intangible (including but not limited to sale, assignment,
discount or other disposition of accounts, contract rights, chattel paper or
general intangibles with or without recourse), except:
(a) Dispositions in the ordinary course of business involving
current assets or other assets classified on such Borrower's balance sheet as
available for sale;
(b) sales, conveyances, assignments or other transfers or
dispositions in immediate exchange for cash or tangible assets, PROVIDED that
any such sales, conveyances or transfers shall not individually, or in the
aggregate for the Borrowers and their respective Subsidiaries, exceed
$500,000,000 in any calendar year; or
(c) Dispositions of equipment or other property which is
obsolete or no longer used or useful in the conduct of the business of such
Borrower or its Subsidiaries.
6.03. LIENS. No Borrower will, nor will it permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on any
property or assets, tangible or intangible, now owned or hereafter acquired by
it, except:
(a) Liens existing on the date hereof (and extension, renewal
and replacement Liens upon the same property, provided that the amount secured
by each Lien constituting such an extension, renewal or replacement Lien shall
not exceed the amount secured by the Lien theretofore existing) and listed on
Schedule 6.03;
-8-
(b) Liens arising from taxes, assessments, charges, levies or
claims described in Section 5.06 that are not yet due or that remain payable
without penalty or to the extent permitted to remain unpaid under the provision
of Section 5.06;
(c) Liens on property securing all or part of the purchase
price thereof to such Borrower and Liens (whether or not assumed) existing on
property at the time of purchase thereof by such Borrower (and extension,
renewal and replacement Liens upon the same property); PROVIDED (i) each such
Lien is confined solely to the property so purchased, improvements thereto and
proceeds thereof, and (ii) the aggregate amount of the obligations secured by
all such Liens on any particular property at any time purchased by such
Borrower, as applicable, shall not exceed 100% of the lesser of the fair market
value of such property at such time or the actual purchase price of such
property;
(d) zoning restrictions, easements, minor restrictions on the
use of real property, minor irregularities in title thereto and other minor
Liens that do not in the aggregate materially detract from the value of a
property or asset to, or materially impair its use in the business of, such
Borrower or any such Subsidiary;
(e) Liens securing Indebtedness permitted by Section 6.07(c)
covering assets whose market value is not materially greater than the amount of
the Indebtedness secured thereby plus a commercially reasonable margin;
(f) Liens on cash and securities of a Borrower or its
Subsidiaries incurred as part of the management of its investment portfolio in
accordance with XL Capital's Statement of Investment Policy Objectives and
Guidelines as in effect on the date hereof or as it may be changed from time to
time by a resolution duly adopted by the board of directors of XL Capital (or
any committee thereof);
-9-
(g) Liens on (i) assets received, and on actual or imputed
investment income on such assets received, relating and identified to specific
insurance payment liabilities or to liabilities arising in the ordinary course
of any Borrower's or any of their Subsidiary's business as an insurance or
reinsurance company (including GICs) or corporate member of The Council of
Lloyd's or as a provider of financial or investment services or contracts, or
the proceeds thereof, in each case held in a segregated trust or other account
and securing such liabilities or (ii) any other assets subject to any trust or
other account arising out of or as a result of contractual, regulatory or any
other requirements; PROVIDED that in no case shall any such Lien secure
Indebtedness and any Lien which secures Indebtedness shall not be permitted
under this clause (g);
(h) statutory and common law Liens of materialmen, mechanics,
carriers, warehousemen and landlords and other similar Liens arising in the
ordinary course of business; and
(i) Liens existing on property of a Person immediately prior
to its being consolidated with or merged into any Borrower or any Subsidiary of
a Borrower or its becoming a Subsidiary, and Liens existing on any property
acquired by any Borrower or any Subsidiary of a Borrower at the time such
property is so acquired (whether or not the Indebtedness secured thereby shall
have been assumed) (and extension, renewal and replacement Liens upon the same
property, PROVIDED that the amount secured by each Lien constituting such an
extension, renewal or replacement Lien shall not exceed the amount secured by
the Lien theretofore existing); PROVIDED that (i) no such Lien shall have been
created or assumed in contemplation of such consolidation or merger or such
Person's becoming a Subsidiary or such acquisition of property and (ii) each
such Lien shall extend solely to the item or items of property so acquired and,
if required by terms of the instrument originally creating such Lien, other
property which is an improvement to or is acquired for specific use in
connection with such acquired property.
-10-
6.04. TRANSACTIONS WITH AFFILIATES. No Borrower will, nor will
it permit any of its Subsidiaries to, enter into or carry out any transaction
with (including, without limitation, purchase or lease property or services to,
loan or advance to or enter into, suffer to remain in existence or amend any
contract, agreement or arrangement with) any Affiliate of such Borrower, or
directly or indirectly agree to do any of the foregoing, except (i) transactions
involving guarantees or co-obligors with respect to any Indebtedness described
in Schedule 6.07, (ii) transactions among the Borrowers and their wholly-owned
Subsidiaries and (iii) transactions with Affiliates in good faith in the
ordinary course of such Borrower's business consistent with past practice and on
terms no less favorable to such Borrower or any Subsidiary than those that could
have been obtained in a comparable transaction on an arm's length basis from an
unrelated Person.
6.05. RATIO OF TOTAL FUNDED DEBT TO TOTAL CAPITALIZATION. XL
Capital will not permit its ratio of (a) Total Funded Debt to (b) the sum of
Total Funded Debt PLUS Consolidated Net Worth to be greater than 0.35:1.00 at
any time.
6.06. CONSOLIDATED NET WORTH. XL Capital will not permit its
Consolidated Net Worth to be less than the sum of (a) $4,600,000,000 PLUS (b)
25% of net income (if positive) for each fiscal quarter of XL Capital commencing
with the fiscal quarter ending June 30, 2001.
6.07. INDEBTEDNESS. No Borrower will, nor will it permit any
of its Subsidiaries to, at any time create, incur, assume or permit to exist
any Indebtedness, or agree, become or remain liable (contingent or otherwise)
to do any of the foregoing, except:
(a) Indebtedness created hereunder;
(b) Indebtedness incurred pursuant to the Letter of Credit and
Reimbursement Agreement dated as of June 29, 2001 between the Obligors, the
lenders party thereto and The Chase Manhattan Bank, as the administrative agent
for such lenders;
-11-
(c) secured Indebtedness (including secured reimbursement
obligations with respect to letters of credit) of any Borrower or any Subsidiary
in an aggregate principal amount (for all Borrowers and their respective
Subsidiaries) not exceeding $300,000,000 at any time outstanding;
(d) other unsecured Indebtedness, so long as upon the
incurrence thereof no Default would occur or exist;
(e) Indebtedness consisting of accounts or claims payable and
accrued and deferred compensation (including options) incurred in the ordinary
course of business by any Borrower or any Subsidiary;
(f) Indebtedness incurred in transactions described in
Section 6.03(f); and
(g) Indebtedness existing on the date hereof and described in
Schedule 6.07 and extensions, renewals and replacements of any such Indebtedness
that do not increase the outstanding principal amount thereof.
6.08. CLAIMS PAYING RATINGS. XL Capital will maintain at
all times a claims-paying rating of at least "A" from A.M. Best & Co. (or its
successor) and XL Insurance and XL Re will maintain at all times a rating of at
least "A" from Standard & Poor's Rating Services (or its successors).
6.09. PRIVATE ACT. No Borrower will become subject to a
Private Act other than the X.L. Insurance Company, Ltd. Act, 1989.
-12-
Annex II to Sixth Amendment
SCHEDULE 6.03
LIENS
Letter of Credit and Reimbursement Agreement dated June 30, 1999, between XL
Insurance Ltd, XL Capital Ltd, XL Europe Ltd, XL Mid Ocean Reinsurance Ltd, and
The Brockbank Group plc as Account Parties and XL Insurance Ltd, XL Capital Ltd,
XL Mid Ocean Reinsurance Ltd and XL Investments Ltd as Guarantors and Mellon
Bank, N.A. as Issuing Bank and Agent.
First amendment to Letter of Credit and Reimbursement Agreement dated June 30,
1999, between XL Insurance Ltd, XL Capital Ltd, XL Europe Ltd, XL Mid Ocean
Reinsurance Ltd, and The Brockbank Group plc as Account Parties and XL Insurance
Ltd, XL Capital Ltd, XL Mid Ocean Reinsurance Ltd and XL Investments Ltd as
Guarantors and Mellon Bank, N.A. as Issuing Bank and Agent dated January 21,
2000.
Second amendment to Letter of Credit and Reimbursement Agreement dated June 30,
1999, between XL Insurance Ltd, XL Capital Ltd, XL Europe Ltd, XL Mid Ocean
Reinsurance Ltd, and The Brockbank Group plc as Account Parties and XL Insurance
Ltd, XL Capital Ltd, XL Mid Ocean Reinsurance Ltd and XL Investments Ltd as
Guarantors and Mellon Bank, N.A. as Issuing bank and Agent dated November 28,
2000.
Letter of Credit Agreement dated May 19, 1993, between Mid Ocean Limited and
Citibank International plc.
Annex III to Sixth Amendment
SCHEDULE 6.07
1. Credit Agreement (5-Year) between Mid Ocean Limited and The Chase
Manhattan Bank, incorporated by reference to Exhibit 10.14.1 to the Company's
Annual Report on Form 10-K (No. 1-10804) for the year ended November 30, 1998.
2. Amendment to No. 1 to Credit Agreement (5-Year) between Mid Ocean
Limited and The Chase Manhattan Bank, incorporated by reference to Exhibit
10.14.2 to the Company's Annual Report on Form 10-K (No. 1-10804) for the year
ended November 30, 1998.
3. Amendment No.2 to Credit Agreement (5-year) between Mid Ocean Limited and The
Chase Manhattan Bank, incorporated by reference to Exhibit 10.14.19 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
4. Amendment No.3 to Credit Agreement (5-year) between Mid Ocean Limited and The
Chase Manhattan Bank, incorporated by reference to Exhibit 10.14.19 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
5. Revolving Credit Agreement Between XL Insurance Company, Ltd. and
Mellon Bank N.A., incorporated by reference to Exhibit (b)(2) of the GCR
Schedule 14D-1, incorporated by reference to Exhibit 10.14.14 to the Company's
Annual Report on Form 10-K (No. 1-10804) for the year ended November 30, 1998.
6. First Amendment to Revolving Credit Agreement between XL Insurance
Company, Ltd. and Mellon Bank N.A., incorporated by reference to Exhibit
10.14.15 to the Company's Annual Report on Form 10-K for the year ended
November 30,1998.
7. Second Amendment to Revolving Credit Agreement between XL Insurance
Company, Ltd. and Mellon Bank N.A., incorporated by reference to Exhibit
10.14.16 to the Company's Annual Report on Form 10-K for the year ended
November 30,1998.
8. Third Amendment to Revolving Credit Agreement between XL Insurance
Company, Ltd. and Mellon Bank, N.A., incorporated by reference to Exhibit
10.14.19 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
9. Fourth Amendment to Revolving Credit Agreement between XL Insurance
Company, Ltd. and Mellon Bank, N.A., incorporated by reference to Exhibit
10.14.19 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
10. Fifth Amendment to Revolving Credit Agreement between XL Insurance
Company, Ltd. and Mellon Bank, N.A., incorporated by
reference to Exhibit 10.14.19 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
11. Letter of Credit Facility and Reimbursement Agreement dated as of June
30, 1999 by and among XL Insurance Ltd. et al. and Mellon Bank, N.A.,
incorporated by reference to Exhibit 10.14.19 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
12. First Amendment to Letter of Credit Facility and Reimbursement
Agreement dated as of June 30, 1999 by and among XL Insurance Ltd. et al. and
Mellon Bank, N.A., incorporated by reference to Exhibit 10.14.19 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999
13. Second Amendment to Letter of Credit Facility and Reimbursement Agreement,
dated as of November 28, 2000, by and among XL Insurance Ltd, XL Europe Ltd, XL
Mid Ocean Reinsurance Ltd, XL Brockbank Group plc, and XL Investments Ltd and
Mellon Bank.
14. 364-day Credit Agreement, dated as of July 5, 2000, between XL Capital
Ltd, X.L. America, Inc., XL Insurance Ltd, XL Europe Ltd and XL Mid Ocean
Reinsurance Ltd, as borrowers and guarantors, the lenders named therein. The
Chase Manhattan Bank, as administrative agent, Chase Securities Inc., as
advisor, lead arranger and book manager, Deutsche Bank AG, as syndication agent,
and Mellon Bank, N.A. and Citibank, N.A., as co-documentation agent,
incorporated by reference to the Company's quarterly report on Form 10-Q for
June 2000.
15. Letter of Credit and Reimbursement Agreement, dated as of July 5, 2000,
between XL Capital Ltd, X.L. America, Inc., XL Insurance Ltd, XL Europe Ltd and
XL Mid Ocean Reinsurance Ltd, as account parties and guarantors, the lenders
party thereto, The Chase Manhattan Bank, as administrative agent, Chase
Securities Inc., as advisor, lead arranger and book manager, Deutsche Bank AG,
as syndication agent, and Mellon Bank, N.A. and Citibank, N.A., as
co-documentation agents, incorporated by reference to the Company's quarterly
report on Form 10-Q for June 2000.
16. Letter of Credit and Reimbursement Agreement, dated November 3, 2000,
between the Company, the guarantors named therein, the lenders named therein,
Citibank International plc, as agent and trustee for the lenders, and Solomon
Brothers International Limited, as arranger.
17. Letter of Credit Agreement (Secured) between XL Mid Ocean Reinsurance Ltd
and Citibank International plc dated May 19, 1993 (as amended) incorporated by
reference to the Company's Prospectus Supplement dated November 3, 1998.
18. Private Placement of $255m 6.58% Senior Notes due 2011 issued by X.L.
America, Inc. dated April 12, 2001. Issue
-2-
arranged by Lehman Brothers and guaranteed by XL Capital Ltd, XL Insurance Ltd,
and XL Re Ltd.
19 XL Capital Ltd Zero-Coupon Convertible Debentures due May 23, 2001.
Arranged by Goldman, Sachs & Co., Deutsche Banc Alex. Brown, and Dresdner
Kleinwort Wasserstein and described in the Offering Circular dated May 18, 2001.
20. 7.15% Senior Notes due 2005 issued by NAC Reinsurance.
-3-
EX-10.48
10
c22070_ex10-48.txt
LETTER OF CREDIT & REIMBURSEMENT AGREEMENT
Exhibit 10.48
EXECUTION COUNTERPART
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
AMENDMENT NO. 1 dated as of September 26, 2001, between XL
CAPITAL LTD, a company incorporated under the laws of the Cayman Islands,
British West Indies ("XL CAPITAL"), X.L. AMERICA, INC., a Delaware corporation
("XL AMERICA"), XL INSURANCE LTD, a Bermuda limited liability corporation ("XL
INSURANCE"), XL EUROPE LTD, a company incorporated under the laws of Ireland
("XL EUROPE") and XL RE LTD, a Bermuda limited liability corporation ("XL RE"
and, together with XL Capital, XL America, XL Insurance and XL Europe, each an
"ACCOUNT PARTY" and each a "GUARANTOR" and collectively, the "ACCOUNT PARTIES"
and the "GUARANTORS"; the Account Parties and the Guarantors being collectively
referred to as the "OBLIGORS"), the LENDERS party hereto, and THE CHASE
MANHATTAN BANK, as Administrative Agent.
The Obligors, the Lenders and the Administrative Agent are
parties to a Letter of Credit and Reimbursement Agreement dated as of June 29,
2001 (the "CREDIT AGREEMENT"), providing, subject to the terms and conditions
thereof, for the issuance of letters of credit for the account of the Account
Parties in an aggregate face amount not exceeding $1,000,000,000. The Obligors,
the Lenders and the Administrative Agent wish to amend the Credit Agreement in
certain respects and accordingly the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. AMENDMENTS. Effective as provided in Section 4
below, the Credit Agreement is hereby amended as follows:
2.01. References in the Credit Agreement (including references
to the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. Clause (b) of Section 4.04 is hereby amended to read in
its entirety as follows:
"(b) NO MATERIAL ADVERSE CHANGE. Since December 31, 2000,
there has been no material adverse change in the assets, business,
financial condition or operations of such Account Party and its
Subsidiaries, taken as a whole, except for losses caused by or relating
to or arising out of the terrorist events of September 11, 2001;
PROVIDED, HOWEVER, that XL Capital remains in compliance with Section
7.06."
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
2.03. Section 7.06 of the Credit Agreement is hereby amended
to read in its entirety as follows:
"SECTION 7.06. CONSOLIDATED NET WORTH. XL Capital will not
permit its Consolidated Net Worth to be less than $4,250,000,000."
Section 3. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby
represents and warrants to the Administrative Agent and the Lenders that (i) the
representations and warranties set forth in Article IV of the Credit Agreement
are, on the date hereof, true and complete as if made on the date hereof (and
after giving effect to this Amendment No. 1) and as if each reference in said
Article IV to "this Agreement" includes reference to this Amendment No. 1 and
(ii) both immediately prior to and as of the date hereof, no Default has
occurred and is continuing.
Section 4. CONDITIONS PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 above shall become effective, as of the date
hereof, upon the satisfaction of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 shall
have been executed and delivered by each of the Obligors and the Required
Lenders.
4.02. AMENDMENT FEE. The Administrative Agent shall have
received for the account of each Lender that consents to this Amendment No. 1
(evidenced by receipt by the Administrative Agent of an executed counterpart of
this Amendment No. 1) an amendment fee in an amount equal to 0.03% of the sum of
LC Exposures and unused Commitments of each such Lender.
4.03. OTHER DOCUMENTS. Receipt by the Administrative Agent of
such other documents as the Administrative Agent or special New York counsel to
Chase may reasonably request.
Section 5. MISCELLANEOUS. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. Nothing in
this Amendment No. 1 shall constitute a waiver of any rights and/or remedies
that the Lenders and/or the Administrative Agent may have under the Credit
Agreement and nothing contained herein shall obligate the Lenders to grant any
future waiver of any provision of the Credit Agreement. XL Capital shall pay all
reasonable expenses incurred by the Administrative Agent, including the
reasonable fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel to Chase, in connection with the preparation,
negotiation, execution and delivery of this Amendment No. 1. This Amendment No.
1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and year first
above written.
X.L. AMERICA, INC.,
as a Account Party and a Guarantor
By /s/ MARTHA BANNERMAN
---------------------------------
Name: Martha Bannerman
Title: Executive Vice President & General
Counsel
XL INSURANCE LTD,
as a Account Party and a Guarantor
By /s/ CHRIS COELHO
------------------------------------------
Name: Chris Coehlo
Title: Senior Vice President &
Chief Financial Officer
XL EUROPE LTD,
as a Account Party and a Guarantor
By /s/ FIONA MULDOON
------------------------------------------
Name: Fiona Muldoon
Title: Chief Financial Officer
and Company Secretary
XL RE LTD,
as a Account Party and a Guarantor
By /s/ HENRY C. V. KEELING
------------------------------------------
Name: Henry C. V. Keeling
Title: President & Chief Executive Officer
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
IN WITNESS WHEREOF, XL Capital has caused this Amendment No. 1
to be duly executed as a Deed by an authorized officer as of the day and year
first above written.
EXECUTED AS A DEED by XL CAPITAL LTD,
as an Account Party and a Guarantor
/s/ PAUL GIORDANO
------------------------------------------
witness
By /s/ MICHAEL SIESE
----------------------------------------
Name: Michael Siese
Title: Senior Vice President & Treasurer
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
LENDERS
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By /s/ HELEN L. NEWCOMB
------------------------------------------
Name: Helen L. Newcomb
Title: Vice President
CITIBANK, N.A.
By: /s/ MICHAEL TAYLOR
-----------------------------------------
Name: Michael Taylor
Title: VP
MELLON BANK, N.A.
By: /s/ KARLA K. MALOOF
-----------------------------------------
Name: Karla K. Maloof
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ DEBRA BASLER
-----------------------------------------
Name: Debra Basler
Title: Vice President
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
BANK ONE, NA
By: /s/ GRETCHEN ROETZER
-----------------------------------------
Name: Gretchen Roetzer
Title: Assistant Vice President
BARCLAYS BANK PLC
By: /s/ RP JOHNSON
-----------------------------------------
Name: RP Johnson
Title: Relationship Director
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ KEN RICCIARDI
-----------------------------------------
Name: Ken Ricciardi
Title: VP
DEUTSCHE BANK AG
By: /s/ RUTH LEUNG
-----------------------------------------
Name: Ruth Leung
Title: Director
By: /s/ CLINTON JOHNSON
-----------------------------------------
Name: Clinton Johnson
Title: Managing Director
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ JONATHAN WALLIN
-----------------------------------------
Name: Jonathan Wallin
Title: Vice President
By: /s/ ERIKA WALTEB-ENGEMANN
-----------------------------------------
Name: Erika Walteb-Engemann
Title: Director
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
FLEET NATIONAL BANK
By: /s/ LAWRENCE DOWNS
-----------------------------------
Name: Lawrence Downs
Title: Associate:
LLOYDS TSB BANK PLC
By: /s/ MICHAEL GILLIGAN
-----------------------------------
Name: Michael Gilligan
Title: Director
By: /s/ PAUL D. BRIAMONTE
-----------------------------------
Name: Paul D. Briamonte
Title: Director - Project Finanance
ABN AMRO BANK N.V., LONDON BRANCH
By: /s/ DW MILLS
-----------------------------------
Name: DW Mills
Title:
By: /s/ MARTYN TAPLIN
-----------------------------------
Name: Martyn Taplin
Title:
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
BANCO SANTANDER CENTRAL HISPANO, S.A.
By: /s/ PHIL PERRY
-----------------------------------------
Name: Phil Perry
Title: Senior Vice President
By: /s/ SEN LOUIE
-----------------------------------------
Name: Sen Louie
Title: Assistant Vice President
COMERICA BANK
By: /s/ MARTIN G. ELLIS
-----------------------------------------
Name: Martin G. Ellis
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ DANIEL J. NORTON
-----------------------------------------
Name: Daniel J. Norton
Title: Director
NATIONAL WESTMINSTER BANK PLC
By: /s/
-----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By: /s/ EDWARD M. ANDERSON
-----------------------------------------
Name: Edward M. Anderson
Title: Vice President
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
EX-10.49
11
c22070_ex10-49.txt
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
AMENDMENT NO. 1 dated as of September 26, 2001, between XL CAPITAL
LTD, a company incorporated under the laws of the Cayman Islands, British West
Indies (the Account Party"), X.L. AMERICA, INC., a Delaware corporation ("XL
AMERICA"), XL INSURANCE LTD, a Bermuda limited liability company ("XL
INSURANCE"), XL EUROPE LTD, a company incorporated under the laws of Ireland
("XL EUROPE") and XL RE LTD, (formerly known as XL MID OCEAN REINSURANCE LTD), a
Bermuda limited liability company (formerly known as XL MID OCEAN REINSURANCE
LTD) ("XL RE" and, together with the Account Party in its capacity as a
Guarantor, XL America, XL Insurance and XL Europe, each a "GUARANTOR" and
collectively, the "GUARANTORS"; the Guarantors and the Account Party being
collectively referred to as the "OBLIGORS"), the LENDERS party hereto, CITIBANK
INTERNATIONAL PLC, as agent and trustee for the Lenders, the "AGENT" and
"SECURITY TRUSTEE", and SALOMON BROTHERS INTERNATIONAL LIMITED, as "Arranger".
The Obligors, the Lenders, the Agent and the Arranger are parties
to a Letter of Credit and Reimbursement Agreement dated November 3, 2000 (the
"CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof, for
the issuance of letters of credit for the account of the Account Party in an
aggregate face amount not exceeding (pound)225,000,000. The Obligors, the
Lenders, and the Agent wish to amend the Credit Agreement in certain respects
and accordingly the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. AMENDMENTS. Effective as provided in Section 4 below,
the Credit Agreement is hereby amended as follows:
2.01. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. Clause (b) of Section 17.5 is hereby amended to read in its
entirety as follows:
"(b) NO MATERIAL ADVERSE CHANGE. Since December 31, 1999, there
has been no material adverse change in the assets, business, financial
condition or operations of such Obligor and its Subsidiaries, taken as a
whole, except for losses caused by or relating to or arising out of the
terrorist events of September 11, 2001; PROVIDED, HOWEVER, that the
Account Party remains in compliance with Clause 19.6 hereof."
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
-2-
2.03. Section 19.6 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"19.6. CONSOLIDATED NET WORTH The Account Party will not permit
its Consolidated Net Worth to be less than the sum of (a) $4,250,000,000
plus (b) 25% of net income (if positive) for each fiscal quarter of the
Account Party commencing with the fiscal quarter ending September 30,
2002."
Section 3. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby
represents and warrants to the Agent and the Lenders that (i) the
representations and warranties set forth in Clause 17 of the Credit Agreement
are, on the date hereof, true and complete as if made on the date hereof (and
after giving effect to this Amendment No. 1) and as if each reference in said
Clause 17 to "this Agreement" includes reference to this Amendment No. 1 and
(ii) both immediately prior to and as of the date hereof, no Default has
occurred and is continuing.
Section 4. CONDITIONS PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 above shall become effective, as of the date
hereof, upon the satisfaction of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 shall have
been executed and delivered by each of the Obligors and the Majority Lenders.
4.02. AMENDMENT FEE. The Agent shall have received for the
account of each Lender that consents to this Amendment No. 1 (evidenced by
receipt by the Agent of an executed counterpart of this Amendment No. 1) an
amendment fee in an amount equal to 0.03% of the sum of LC Exposures and unused
Commitments of each such Lender.
Section 5. MISCELLANEOUS. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. Nothing in this
Amendment No. 1 shall constitute a waiver of any rights and/or remedies that the
Lenders and/or the Agent may have under the Credit Agreement and nothing
contained herein shall obligate the Lenders to grant any future waiver of any
provision of the Credit Agreement. The Account Party shall pay all reasonable
expenses incurred by the Agent, including the reasonable fees, charges and
disbursements of Freshfields, Bruckhaus Deringer, special United Kingdom counsel
to the Agent, in connection with the preparation, negotiation, execution and
delivery of this Amendment No. 1. This Amendment No. 1 may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same amendatory instrument and any of the parties hereto may execute this
Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall be
governed by, and construed in accordance with, the laws of England and Wales.
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
-3-
DULY DELIVERED AS A DEED by the Chargor on the date inserted
above.
EXECUTED as a DEED ) /s/ Paul S. Giordano
for and on behalf of )
XL CAPITAL LTD ) /s/ Michael A. Siese
SIGNED )
for and on behalf of )
CITIBANK INTERNATIONAL PLC )
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
duly executed and delivered as of the day and year first above written.
ACCOUNT PARTY
EXECUTED as a DEED
by XL CAPITAL LTD
By /s/ Paul S. Giordano
--------------------
Name: Paul S. Giordano
Title: EVP, General Counsel & Secretary
Witness Name: Michael A. Siese
-----------------
Occupation: SVP & Controller
-----------------
Signature: /s/ Michael Siese
-----------------
GUARANTORS
EXECUTED as a DEED
by XL CAPITAL LTD
By /s/ Paul S. Giordano
--------------------
Name: Paul S. Giordano
Title: EVP, General Counsel & Secretary
Witness Name: Michael A. Siese
-----------------
Occupation: SVP & Controller
-----------------
Signature: /s/ Michael Siese
-----------------
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
-5-
X.L. AMERICA, INC.
By: /s/ Martha G. Bannerman
Name: Martha G. Bannerman
Title: Executive Vice President & General Counsel
XL INSURANCE LTD
By: /s/ Christopher Coelho
Name: Christopher Coelho
Title: SVP & Chief Financial Officer
XL EUROPE LTD
By: /s/ Fiona Muldoon
Name: Fiona Muldoon
Title: Chief Financial Officer & Company Secretary
XL RE LTD (formerly known as XL MID
OCEAN REINSURANCE LTD)
By: /s/ Henry C. V. Keeling
Name: Henry C. V. Keeling
Title: President & Chief Executive Officer
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
-6-
AGENT
CITIBANK INTERNATIONAL PLC
By: /s/ Sonia Gosparini
Name: Sonia Gosparini
Title:
SECURITY TRUSTEE
CITIBANK INTERNATIONAL PLC
By:
Name:
Title:
LENDERS
CITIBANK, N.A.
By: /s/ Michael A. Taylor
Name: Michael A. Taylor
Title: Vice President
BARCLAYS BANK PLC
By: /s/ Paul Johnson
Name: Paul Johnson
Title: Relationship Director
ING BANK, N.V, LONDON BRANCH
By:
Name:
Title:
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
-7-
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Ken Ricciardi
Name: Ken Ricciardi
Title: Vice President
NATIONAL WESTMINSTER BANK PLC
By: /s/ John Mallett
Name: John Mallett
Title: Senior Corporate Manager, City Market Group
AMENDMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT